Estimating the Effect of Entrenched Boards on Firm Value Using Geographic Identification

14 Pages Posted: 16 Nov 2014

See all articles by Pandej Chintrakarn

Pandej Chintrakarn

Mahidol University International College (MUIC)

Pornsit Jiraporn

Pennsylvania State University - School of Graduate Professional Studies (SGPS)

Shenghui Tong

Central University of Finance and Economics (CUFE)

Pattanaporn Chatjuthamard

Sasin GIBA

Date Written: November 14, 2014

Abstract

We show that firms located geographically close to one another share a similar probability of having staggered boards (or classified boards), an effect probably due to investor clientele, local competition, and social interactions. We then exploit the variation across the zip codes in the incidence of staggered boards and estimate the effect of staggered boards on firm value (measured by Tobin’s Q). We use as our instrumental variable the proportion of firms located in the same zip code that have staggered boards, excluding firm i. The evidence shows that staggered boards reduce firm value significantly.

Keywords: staggered boards, classified boards, entrenched boards, firm value, geography

JEL Classification: G32, G34

Suggested Citation

Chintrakarn, Pandej and Jiraporn, Pornsit and Tong, Shenghui and Chatjuthamard, Pattanaporn, Estimating the Effect of Entrenched Boards on Firm Value Using Geographic Identification (November 14, 2014). Available at SSRN: https://ssrn.com/abstract=2524615 or http://dx.doi.org/10.2139/ssrn.2524615

Pandej Chintrakarn

Mahidol University International College (MUIC) ( email )

999 Buddhamonthon 4 Road
Salaya, Nakhonpathom, 73170
Thailand
66 (0) 2441 5090 (Phone)
66 (0) 2441 9745 (Fax)

Pornsit Jiraporn (Contact Author)

Pennsylvania State University - School of Graduate Professional Studies (SGPS) ( email )

30 E. Swedesford Road
Malvern, PA 19355
United States
(484) 753-3655 (Phone)

HOME PAGE: http://www.personal.psu.edu/pxj11/index1.html

Shenghui Tong

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China

Pattanaporn Chatjuthamard

Sasin GIBA ( email )

Bangkok
Thailand

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