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

Cohen, Alma; Wang, Charles C. Y.

doi:10.2139/ssrn.2141410

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

Journal of Financial Economics, Vol. 110, No. 3, pp. 627-641, (2013)

Harvard Business School Accounting & Management Unit Working Paper No. 13-068

45 Pages Posted: 4 Sep 2012 Last revised: 25 May 2017

See all articles by Alma Cohen

Alma Cohen

Harvard Law School; Tel Aviv University - Eitan Berglas School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Charles C. Y. Wang

Harvard University - Accounting & Control Unit; European Corporate Governance Institute (ECGI)

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: 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, Vol. 110, No. 3, pp. 627-641, (2013), 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