Undoing the Powerful Anti-Takeover Force of Staggered Boards

Abstract:     
We examine cases where managers announce an intention to de-stagger their boards via proxy proposals or board action. The literature has established the staggered board as the most consequential of all takeover defenses and one that destroys wealth. Thus, dismantling this structure should create value. We study the wealth effects and motives behind this change in governance within a conditional event study. We find that de-staggering the board creates wealth and that shareholder activism is an important catalyst for pushing through this change. Moreover, investor reaction shows a perception that de-staggering firms are more likely to be takeover targets.

Keywords: Staggered boards, Corporate governance, shareholder proposals

JEL Classifications: G34

Working Paper Series