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Staggered Boards and Long-Term Firm Value, Revisited

56 Pages Posted: 7 Dec 2013 Last revised: 25 Jul 2017

Martijn Cremers

University of Notre Dame

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; IAST - Fondation Jean-Jacques Laffont - TSE ; University of Toulouse 1 - Industrial Economic Institute (IDEI)

Date Written: July 25, 2017

Abstract

This paper revisits the staggered board debate focusing on the long-term association of firm value with changes in board structure. We find no evidence that staggered board changes are negatively related to firm value. However, we find a positive relation for firms engaged in innovation and where stakeholder relationships matter more. This suggests that staggered boards promote value creation for some firms by committing the firm to undertaking long-term projects and bonding it to the relationship-specific investments of its stakeholders. Our results are robust to matching procedures and an exogenous change in Massachusetts corporate law that mandated staggered boards.

Keywords: Staggered Boards, Classified Boards, Firm Value, Long-term Commitment, Entrenchment

JEL Classification: G34, K22

Suggested Citation

Cremers, Martijn and Litov, Lubomir P. and Sepe, Simone M., Staggered Boards and Long-Term Firm Value, Revisited (July 25, 2017). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=2364165 or http://dx.doi.org/10.2139/ssrn.2364165

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

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

Lubomir Litov

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States

University of Pennsylvania - Wharton Financial Institutions Center

2306 Steinberg Hall-Dietrich Hall
3620 Locust Walk
Philadelphia, PA 19104
United States

Simone Sepe

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

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

IAST - Fondation Jean-Jacques Laffont - TSE ( email )

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

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France

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