Board Declassification Activism: The Financial Value of the Shareholder Rights Project
40 Pages Posted: 3 May 2017 Last revised: 21 Jun 2017
Date Written: June 2, 2017
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: Suggested Citation