Staggered Boards, Unequal Voting Rights, Poison Pills and Innovation Intensity: New Evidence from the Asian Markets.

Abstract

This study examines the impact of staggered boards, poison pills, and unequal voting rights on corporate innovation intensity using a sample of listed firms in six Asian countries from 2010-2017. We analyze the differential effects of antitakeover provisions using the high order fixed effects panel data model that controls for firm fixed effects, industry-year fixed effects, and country-year fixed effects. The propensity score-matched sample is used to deal with possible endogeneity issues. This paper shows that adopting staggered boards impede R&D investments while unequal voting rights and poison pills pose no influence on long term R&D investments. We also find that a combination of staggered boards and poison pill provisions discourage innovation. We find that the effect of staggered boards on R&D investment is more pronounced in old firms, large firms, firms with poor corporate governance, opaque firms, less indebted firms, and firms with more cash holdings. Our study evidence supports that poison pill provisions have no effect on their own, but a combination of a staggered board and a poison pill provision contributes to managerial entrenchment.

Keywords: Asia, Antitakeover Provisions, Corporate Governance, Innovation Intensity, Staggered Board, Unequal Voting Rights

JEL Classification: G32, G34, K22, O31, O32