Classified boards, firm value, and managerial entrenchment

• 成果类型: Article
• 署名作者: Faleye, Olubunmi
• 署名单位: Northeastern University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2006.01.005
• 发表日期: 2007
• 页码: 501-529
• 关键词: classified boards; MANAGERIAL ENTRENCHMENT; Executive compensation

摘要

This paper shows that classified boards destroy value by entrenching management and reducing director effectiveness. First, I show that classified boards are associated with a significant reduction in firm value and that this holds even among complex firms, although such firms are often regarded as most likely to benefit from staggered board elections. I then examine how classified boards entrench management by focusing on CEO turnover, executive compensation, proxy contests, and shareholder proposals. My results indicate that classified boards significantly insulate management from market discipline, thus suggesting that the observed reduction in value is due to managerial entrenchment and diminished board accountability. (c) 2006 Elsevier B.V. All rights reserved.