Board Declassification Activism: The Financial Value of the Shareholder Rights Project

40 Pages Posted: 3 May 2017 Last revised: 21 Jun 2017

See all articles by Martijn Cremers

Martijn Cremers

University of Notre Dame; ECGI

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI); American College of Governance Counsel

Date Written: June 2, 2017

Abstract

For three academic years (2011-2014), the Harvard Law School’s Shareholder Rights Project (SRP) operated a clinical program assisting institutional investors on board declassification proposals. This paper analyzes the SRP as a quasi-natural experiment to examine the value implications of classified boards. Consistent with the SRP causing exogenous declassifications, SRP targets that declassified their boards had greater ex-ante value and profitability than non-targeted companies declassifying in the same period. Declassifying SRP targets, and especially targets more engaged in research and innovation, declined in firm value after declassification, which wealth effect is directly attributable to declassification rather than other activism-related channels.

Keywords: staggered board, declassification, firm value, shareholder activism, shareholder proposals, legal clinic

JEL Classification: G32, G34, K22

Suggested Citation

Cremers, K. J. Martijn and Sepe, Simone M., Board Declassification Activism: The Financial Value of the Shareholder Rights Project (June 2, 2017). Available at SSRN: https://ssrn.com/abstract=2962162 or http://dx.doi.org/10.2139/ssrn.2962162

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Simone M. Sepe

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

University of Toulouse 1 - Université Toulouse 1 Capitole ( email )

2 Rue du Doyen-Gabriel-Marty
Toulouse, 31042
France

Toulouse School of Economics ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
Toulouse Cedex, F-31042
France

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

American College of Governance Counsel ( email )

555 8th Avenue, Suite 1902
New York, NY 10018
United States

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