Staggered Boards and the Value of Voting Rights
62 Pages Posted: 11 Jul 2015 Last revised: 11 Dec 2018
Date Written: December 10, 2018
This paper examines the impact of staggered boards on the value of voting rights (i.e., voting premium) estimated using option prices. We find companies with staggered boards have higher voting premium. Exploiting plausibly exogenous court rulings, we confirm that weakening the effectiveness of staggered boards decreases the voting premium. Given that voting premium reflects private benefits consumption and associated managerial inefficiencies, our findings are consistent with the entrenchment view on staggered boards. Analyzing the cross-sectional heterogeneity in our sample, we find the entrenchment effect of staggered boards to be more pronounced for firms in non-competitive industries and for mature firms.
Keywords: Staggered Boards, Classified Boards, Private Benefits, Corporate Governance, Voting Premium, Value of Voting Rights, Product Market Competition, Life Cycle
JEL Classification: G13, G30, G34, K22
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