Undoing the Powerful Anti-Takeover Force of Staggered Boards

摘要

In this paper we examine cases where managers announce an intention to de-stagger their boards via either proxy proposals or board action. The literature has now established the staggered board as arguably the most consequential of all available takeover defenses. Thus, the dismantling of this structure in favor of annual director elections has important implications for shareholder rights and wealth. We study the wealth effects and motives behind this change in governance. Our results are consistent with the view that forcing directors to face annual election is good for shareholders. Moreover, it is firms with better governance and more active shareholders that are more likely to act in the interest of shareholders.