Staggered Boards and Shareholder Value: A Reply to Amihud and Stoyanov

Abstract

In a paper published in the JFE in 2013, we provided evidence that market participants perceive staggered boards to be on average value-reducing. In a recent response paper, Amihud and Stoyanov (2015) “contest” our results. They advocate using alternative methods for estimating risk-adjusted returns and excluding some observations from our sample. Amihud and Stoyanov claim that making such changes renders our results not significant (though retaining their direction) and conclude that staggered boards have no significant effect on firm value. This paper examines and replies to the Amihud-Stoyanov challenge. We question their methodological claims, study the consequences of following their suggestions, and conduct additional robustness tests. Our analysis shows that the evidence is overall consistent with the results and conclusions of our JFE paper.

Keywords: Corporate governance, Staggered boards, Takeover defense, Antitakeover provision, Firm value, Agency costs, Delaware, Chancery court, Airgas

JEL Classification: G30, G34, K22