Working Paper: NBER ID: w10587
Authors: Lucian Bebchuk; Alma Cohen
Abstract: This paper investigates empirically how the value of publicly traded firms is overall affected by arrangements protecting management from removal. A majority of U.S. public companies have staggered boards that substantially insulate the board from removal via a hostile takeover or a proxy contest. We find that staggered boards are associated with an economically significant reduction in firm value (as measured by Tobin's Q). We also find evidence consistent with staggered boards' bringing about, and not merely reflecting, a lower firm value. Finally, the correlation with reduced firm value is stronger for staggered boards established in the corporate charter (which shareholders cannot amend) than for staggered boards established in the company's bylaws (which can be amended by shareholders).
Keywords: No keywords provided
JEL Codes: G30; G34; K22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| staggered boards (G34) | firm value (G32) |
| staggered boards (G34) | Tobin's Q (G19) |
| firm value in 1990 (G32) | firm value (G32) |
| staggered boards established in corporate charter (G34) | firm value (G32) |
| staggered boards established in company bylaws (G34) | firm value (G32) |