How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment

45 Pages Posted: 4 Sep 2012 Last revised: 4 Jul 2013

Alma Cohen

Tel Aviv University - Eitan Berglas School of Economics; Harvard Law School; National Bureau of Economic Research (NBER)

Charles C. Y. Wang

Harvard Business School

Date Written: July 3, 2013

Abstract

The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms' greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings ― separated by several weeks and going in opposite directions ― that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by presenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms.

Keywords: Corporate governance, Staggered board, Takeover defense, Antitakeover provision, Proxy fight, Tobin's, Firm value, Agency cost, Delaware, Chancery court, Airgas

JEL Classification: G30, G34, K22

Suggested Citation

Cohen, Alma and Wang, Charles C. Y., How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment (July 3, 2013). Journal of Financial Economics (JFE), Forthcoming; Harvard Business School Accounting & Management Unit Working Paper No. 13-068. Available at SSRN: https://ssrn.com/abstract=2141410 or http://dx.doi.org/10.2139/ssrn.2141410

Alma Cohen

Tel Aviv University - Eitan Berglas School of Economics ( email )

Ramat Aviv, Tel Aviv, 69978
Israel

Harvard Law School ( email )

Cambridge, MA 02138
United States
(617) 496-4099 (Phone)
(617) 812-0554 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Charles C. Y. Wang (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Paper statistics

Downloads
760
Rank
25,218
Abstract Views
4,683