CLASSIFIED BOARDS AND FIRM VALUE REVISITED

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Abstract

We reexamine the negative relation between firm value and board classification. We document that firms with characteristics indicating low power to bargain for favorable terms in a takeover, but also indicating high potential agency costs, are more likely to have a classified board in place. We also find that among these firms, those with classified boards have higher valuation, as measured by Tobin’s Q. This result is robust to various controls for endogeneity. Our evidence suggests that adopting a classified board is beneficial for certain firms and challenges the commonplace view that board classification is an antitakeover device that necessarily harms shareholders.

Keywords: Corporate Governance, Classified Board, Staggered Board, Antitakeover Provisions, Tobin’s Q

How to cite this paper: Stráska, M., & Waller, G. (2011). Classified boards and firm value revisited. Corporate Ownership & Control, 8(3), 69-85. https://doi.org/10.22495/cocv8i3p6