Staggered Boards, Managerial Entrenchment, and Dividend Policy

42 Pages Posted: 26 Mar 2009  

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Pandej Chintrakarn

Mahidol University International College (MUIC)

Date Written: March 25, 2009

Abstract

Motivated by agency theory, we explore the potential impact of managerial entrenchment through staggered boards on dividend policy. The evidence suggests that firms with staggered boards are more likely to pay dividends and pay them more generously than do those with unitary boards. We also show that the impact of staggered boards on dividend payouts is substantially stronger (as much as two to three times larger) than the effect of all other corporate governance provisions combined. Overall, the evidence is consistent with the notion that dividends help alleviate agency conflicts. Thus, firms more vulnerable to managerial entrenchment, i.e. firms with staggered board, rely more on dividends to mitigate agency costs. Aware of potential endogeneity, we demonstrate that staggered boards likely bring about, and are not merely associated with, larger dividend payouts. Our results are important as they show that certain governance provisions have considerably more influence than others on critical corporate activities such as dividend payout decisions.

Keywords: dividends, classified boards, staggered boards, corporate governance

JEL Classification: G30, G32, G35

Suggested Citation

Jiraporn, Pornsit and Chintrakarn, Pandej, Staggered Boards, Managerial Entrenchment, and Dividend Policy (March 25, 2009). Available at SSRN: https://ssrn.com/abstract=1368384 or http://dx.doi.org/10.2139/ssrn.1368384

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Paper statistics

Downloads
216
Rank
115,766
Abstract Views
1,142