Staggered Boards and the Value of Voting Rights

Review of Corporate Finance Studies (RCFS), Volume 10, Issue 3, pp. 513–550, September 2021

64 Pages Posted: 11 Jul 2015 Last revised: 27 Sep 2021

See all articles by Oğuzhan Karakaş

Oğuzhan Karakaş

Cambridge Judge Business School - Finance Subject Group; European Corporate Governance Institute (ECGI)

Mahdi Mohseni

Tehran Institute of Advanced Studies

Date Written: December 5, 2020

Abstract

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

Suggested Citation

Karakaş, Oğuzhan and Mohseni, Mahdi, Staggered Boards and the Value of Voting Rights (December 5, 2020). Review of Corporate Finance Studies (RCFS), Volume 10, Issue 3, pp. 513–550, September 2021, Available at SSRN: https://ssrn.com/abstract=2628954 or http://dx.doi.org/10.2139/ssrn.2628954

Oğuzhan Karakaş (Contact Author)

Cambridge Judge Business School - Finance Subject Group ( email )

University of Cambridge
Trumpington St.
Cambridge, CB2 1AG
United Kingdom

HOME PAGE: http://jbs.cam.ac.uk/faculty-research/faculty-a-z/oguzhan-karakas/

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/o%C4%9Fuzhan-karaka%C5%9F

Mahdi Mohseni

Tehran Institute of Advanced Studies ( email )

Tehran, NJ
Iran
8572255120 (Phone)
08619 (Fax)

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