How do staggered boards affect shareholder value?

Description

"This paper examines whether staggered boards reduce firm value or are merely associated with it due to the tendency of low-value firms to maintain staggered boards. To analyze this causal question, we take advantage of a natural experiment involving two offsetting court rulings, separated by several weeks, that affected the antitakeover force of staggered boards for a subset of Delaware firms. We find evidence consistent with the hypothesis that the market viewed the antitakeover force of staggered boards as value-reducing. Our findings have implications for the long-standing policy debate on the desirability of staggered boards."

Description

"The well-established negative correlation between staggered boards (SBs) and firm value could be due to SBs leading to lower value or a reflection of low-value firms' greater propensity to maintain SBs. We analyze the causal question using a natural experiment involving two Delaware court rulings--separated by several weeks and going in opposite directions--that affected the antitakeover force of SBs. We contribute to the long-standing debate on staggered boards by documenting empirical evidence consistent with the market viewing SBs as leading to lower firm value for the affected firms."

Subjects

Series Statement

• Working paper / Harvard Business School -- 13-068

Other Editions

• How do staggered boards affect shareholder value?: evidence from a natural experimentHarvard Business School2013-01-01
• How do staggered boards affect shareholder value ?Harvard Business School2013-01-01