Working Paper
| HBS Working Paper Series
| 2013
How Do Staggered Boards Affect Shareholder Value? Evidence from a Natural Experiment
Alma Cohen and Charles C.Y. Wang
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.
Keywords: corporate governance;
staggered board;
takeover defense;
antitakeover provision;
proxy fight;
Tobin's Q;
firm value;
agency cost;
Delaware;
chancery court;
Airgas;