Thirty Years of Change: The Evolution of Classified Boards

Abstract

Based on a comprehensive data set of classified (staggered) boards covering nearly all U.S. public firms from 1991 to 2020, we show that contrary to conventional wisdom, the use of classified boards is still prevalent. Moreover, there are significant differences in classified board usage over a firm’s life cycle depending on the decade the firm matured or year it went public. While classified boards were rarely removed in the 1990s, firms became more likely to declassify as they matured during the following decades. Decreased collective action costs and increased innovation-related investments, institutional ownership, and scrutiny on governance contributed to this more dynamic adjustment.

Keywords: Takeover defenses, Classified (staggered) boards, Life cycle, Machine learning, IPO cohorts, Corporte governance

JEL Classification: C81, D22, G23, G30, G34