Explaining the Staggered Board Discount

33 Pages Posted: 15 Sep 2011 Last revised: 5 Oct 2011

See all articles by Esteban L. Afonso

Esteban L. Afonso

University of Georgia

M. Babajide Wintoki

University of Kansas - School of Business

Date Written: October 4, 2011


We argue that the documented discount on firms with staggered boards is not evidence that staggered boards destroy firm value. Instead, firms that are already discounted relative to industry peers choose to adopt a staggered board. We find that when the macroeconomic environment is weak, deeply discounted firms, especially those in industries undergoing extensive merger activity, are more likely to choose (or retain) staggered boards than other types of firms. We use three econometric techniques to control for the decision to have a staggered board and find that the staggered board discount suggested by OLS regressions drops, and in some cases, even becomes a small premium. Staggered boards do not necessarily cause a loss of firm value after adoption but rather, are a symptom of other underlying factors that cause the market to impute a discount to the firm.

Keywords: Corporate governance, agency costs, boards, directors, takeovers, tender offers, mergers and acquisitions, proxy fights, defensive tactics, entrenchment, anti-takeover provisions, staggered boards

JEL Classification: G30, G34, K22

Suggested Citation

Afonso, Esteban L. and Wintoki, Modupe Babajide, Explaining the Staggered Board Discount (October 4, 2011). Available at SSRN: https://ssrn.com/abstract=1927471 or http://dx.doi.org/10.2139/ssrn.1927471

Esteban L. Afonso (Contact Author)

University of Georgia ( email )

Athens, GA 30602-6254
United States

Modupe Babajide Wintoki

University of Kansas - School of Business ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States

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