How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment

Abstract:     
The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms' greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings ― separated by several weeks and going in opposite directions ― that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by documenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.

Number of Pages in PDF File: 46

Keywords: Corporate governance, staggered board, takeover defense, antitakeover provision, proxy fight, Tobin's Q, firm value, agency cost, Delaware, chancery court, Airgas

JEL Classification: G30, G34, K22

working papers series