BOARD COMPOSITION, OWNERSHIP STRUCTURE, AND HOSTILE TAKEOVERS

This paper examines whether differences in the structure of the board of directors and equity ownership contribute to the incidence of hosti le takeovers. Evidence from a sample of completed and abandoned hostil e takeover attempts that occurred during 1980-1988 indicates that, rel ative to a control sample, outside directors in hostile targets have l ower ownership stakes and hold fewer additional outside directorships. Ownership by blockholders unaffiliated with management raises and tha t by affiliated blockholders decreases the likelihood of a hostile tak eover attempt. These results suggest that the board of directors and h ostile takeovers are substitute mechanisms and that unaffiliated block holdings and hostile takeovers are complementary mechanisms for corpor ate control.