Do Classified Boards Deter Takeovers? Evidence from Merger Waves

We exploit the arrival of industry-wide synergistic merger waves to identify whether classified boards deter takeover bids. In a stylized model, we show that when target classified boards are costly to bidders, their negative effect on takeover likelihood should be more pronounced during merger waves. Using a sample of takeover bids in the United States between 1990 and 2016, we find strong evidence supporting this prediction. The results are robust to accounting for the benefits of classified boards and controlling for other antitakeover provisions. Our findings suggest that classified boards effectively reduce a firm’s exposure to the takeover market.

Keywords: Classified Board, Takeover Likelihood, Merger Waves, Antitakeover Provisions

JEL Classification: G34, K22

Suggested Citation: Suggested Citation

John, Kose and Kadyrzhanova, Dalida and Lee, Sangho, Do Classified Boards Deter Takeovers? Evidence from Merger Waves (July 19, 2022). Journal of Financial and Quantitative Analysis, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2024589 or http://dx.doi.org/10.2139/ssrn.2024589