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Board Declassification Activism: The Financial Value of the Shareholder Rights Project

40 Pages Posted: 3 May 2017 Last revised: 21 Jun 2017

Martijn Cremers

University of Notre Dame

Simone M. Sepe

University of Arizona - James E. Rogers College of Law; IAST - Fondation Jean-Jacques Laffont - TSE ; University of Toulouse 1 - Industrial Economic Institute (IDEI)

Date Written: June 2, 2017

Abstract

For three academic years (2011-2014), the Harvard Law School’s Shareholder Rights Project (SRP) operated a clinical program assisting institutional investors on board declassification proposals. This paper analyzes the SRP as a quasi-natural experiment to examine the value implications of classified boards. Consistent with the SRP causing exogenous declassifications, SRP targets that declassified their boards had greater ex-ante value and profitability than non-targeted companies declassifying in the same period. Declassifying SRP targets, and especially targets more engaged in research and innovation, declined in firm value after declassification, which wealth effect is directly attributable to declassification rather than other activism-related channels.

Keywords: staggered board, declassification, firm value, shareholder activism, shareholder proposals, legal clinic

JEL Classification: G32, G34, K22

Suggested Citation

Cremers, Martijn and Sepe, Simone M., Board Declassification Activism: The Financial Value of the Shareholder Rights Project (June 2, 2017). Available at SSRN: https://ssrn.com/abstract=2962162

K. J. Martijn Cremers (Contact Author)

University of Notre Dame ( email )

P.O. Box 399
Notre Dame, IN 46556-0399
United States

Simone Sepe

University of Arizona - James E. Rogers College of Law ( email )

P.O. Box 210176
Tucson, AZ 85721-0176
United States

IAST - Fondation Jean-Jacques Laffont - TSE ( email )

21 allée de Brienne
31015 Toulouse Cedex 6
Toulouse Cedex, F-31042
France

University of Toulouse 1 - Industrial Economic Institute (IDEI) ( email )

Manufacture des Tabacs
21 Allee de Brienne bat. F
Toulouse Cedex, F-31000
France

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