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
Date Written: December 5, 2020
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: Suggested Citation