Classified Boards, Stability, and Strategic Risk Taking

Posted: 31 Jan 2009

See all articles by Olubunmi Faleye

Olubunmi Faleye

Northeastern University - D'Amore-McKim School of Business

Date Written: January, 30 2009

Abstract

Classified boards are the focus of recent shareholder activism aimed at improving U.S. corporate governance. Although critics argue that classified boards reduce directors' effectiveness, proponents counter that they enhance corporate stability, board independence, and long-term strategic risk taking. Based on hand-collected data, this study found that stability was similar for both classified and nonclassified boards and that continuity rates for independent directors were comparable for both categories. The study found as well that companies with classified boards invested less in R&D and other company-specific capital assets. These findings were also true for companies with relatively complex operations that are often considered most likely to benefit from classified boards.

Keywords: Corporate Governance; Corporate Finance: Capital Investment Decisions

Suggested Citation

Faleye, Olubunmi, Classified Boards, Stability, and Strategic Risk Taking (January, 30 2009). Financial Analysts Journal, Vol. 65, No. 1, 2009, Available at SSRN: https://ssrn.com/abstract=1335451

Olubunmi Faleye (Contact Author)

Northeastern University - D'Amore-McKim School of Business ( email )

Boston, MA 02115
United States

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