Staggered Boards and Long-Term Firm Value, Revisited

Cremers, Martijn; Litov, Lubomir P.; Sepe, Simone M.

doi:10.2139/ssrn.2364165

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Staggered Boards and Long-Term Firm Value, Revisited

Journal of Financial Economics (JFE), Forthcoming

56 Pages Posted: 7 Dec 2013 Last revised: 25 Jul 2017

See all articles by Martijn Cremers

Lubomir P. Litov

University of Oklahoma - Michael F. Price College of Business; University of Pennsylvania - Wharton Financial Institutions Center

University of Arizona - James E. Rogers College of Law; University of Toulouse 1 - Université Toulouse 1 Capitole; Toulouse School of Economics; European Corporate Governance Institute (ECGI); American College of Governance Counsel

Date Written: July 25, 2017

Abstract

This paper revisits the staggered board debate focusing on the long-term association of firm value with changes in board structure. We find no evidence that staggered board changes are negatively related to firm value. However, we find a positive relation for firms engaged in innovation and where stakeholder relationships matter more. This suggests that staggered boards promote value creation for some firms by committing the firm to undertaking long-term projects and bonding it to the relationship-specific investments of its stakeholders. Our results are robust to matching procedures and an exogenous change in Massachusetts corporate law that mandated staggered boards.

Keywords: Staggered Boards, Classified Boards, Firm Value, Long-term Commitment, Entrenchment

JEL Classification: G34, K22

Suggested Citation: Suggested Citation

Cremers, K. J. Martijn and Litov, Lubomir P. and Sepe, Simone M., Staggered Boards and Long-Term Firm Value, Revisited (July 25, 2017). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2364165 or http://dx.doi.org/10.2139/ssrn.2364165