How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment
Tel Aviv University - Eitan Berglas School of Economics; Harvard Law School; National Bureau of Economic Research (NBER)
Charles C. Y. Wang
Harvard Business School
July 3, 2013
Journal of Financial Economics (JFE), Forthcoming
Harvard Business School Accounting & Management Unit Working Paper No. 13-068
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 presenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.
Number of Pages in PDF File: 45
Keywords: Corporate governance, Staggered board, Takeover defense, Antitakeover provision, Proxy fight, Tobin's, Firm value, Agency cost, Delaware, Chancery court, Airgas
JEL Classification: G30, G34, K22
Date posted: September 4, 2012 ; Last revised: July 4, 2013
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