Undoing the Powerful Anti-Takeover Force of Staggered Boards

Guo, Re‐Jin; Kruse, Timothy A.; Nohel, Tom

doi:10.2139/ssrn.891534

Cited by 33 publications

(34 citation statements)

References 43 publications

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“…By not ever having the entire board up for re‐election at the same time, the CEO may be able to keep directors who will be more likely to side with his or her interests at the expense of shareholders (Porac et al, 1999). Furthermore, having staggered board elections makes acquisitions or hostile takeovers more difficult and has been suggested as a means of encouraging entrenchment of managers (Bebchuk & Cohen, 2005; Guo, Kruse, & Nohel, 2008). We follow Porac et al (1999) and create a dummy variable for Staggered Board , which takes the value of one if the firm's entire board is not up for re‐election at the same time, i.e., staggered, and zero if it is a unitary board with all members standing for election each year.…”

Section: Methodsmentioning

confidence: 99%

CEO Power and Risk Taking: Evidence from the Subprime Lending Industry

Lewellyn

Muller‐Kahle

2012

Corporate Governance

201

150

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Manuscript Type: EmpiricalResearch Question/Issue: There is a general consensus that the lack of restraint by US financial firm executives to engage in risky subprime mortgage lending practices played a contributing role in both the inflation and deflation of the housing bubble at the heart of the global financial crisis. Evidence is less clear on what influenced the managerial proclivity to ignore warning signs and take on more and more risk to the detriment of numerous firm stakeholders. Our study examines the effects of power on Managerial Risk Taking in the context of the subprime mortgage industry. Research Findings/Insights: We hypothesize that a CEO's power is positively related to excessive risk taking. We find general support for these hypotheses in a matched pair sample of 74 firms and 344 firm years, where half the firms specialized in subprime lending and the other did not from 1997 to 2005. Theoretical/Academic Implications: We take a novel theoretical approach to our research by drawing from the social psychology literature to employ the approach/inhibition theory of power. The use of this theoretical perspective affords the opportunity to contribute a nuanced understanding of how managerial power within an agency-based governance framework propels managers from taking reasonable risks to engaging in excessive risk taking. Practitioner/Policy Implications: By presenting evidence of the role CEO Power had in promoting excessive risky lending practices, corporate directors and policy makers will be empowered and more capable of designing and enacting governance and regulatory frameworks that result in not only profitable but prudent risk taking.

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Section: Methodsmentioning

confidence: 99%

CEO Power and Risk Taking: Evidence from the Subprime Lending Industry

Lewellyn

Muller‐Kahle

2012

Corporate Governance

201

150

View full text Add to dashboard Cite

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“…Both studies document no significant announcement effects in short-term event windows (1 or 2 days) around the announcement date. 9 While some report an insignificant market reaction or a negative one (Linn and McConnell (1983), Gillan and Starks (2000)), others report a positive market reaction (Faleye (2007), Guo, Kruse, and Nohel (2008), and Cunat, Gine, and Guadalupe (2012)). For those that are significant, the returns vary from as low as −2.95% (Jarrell and Poulsen (1987)) to as high as +3.4% (Lambert and Larcker (1985)), depending on the sample period and the provisions examined.…”

Section: Empirical Evidence 7 a Evidence From Short-run Event Stmentioning

confidence: 99%

Antitakeover Provisions and Shareholder Wealth: A Survey of the Literature

Stráska

Waller

2014

J. Financ. Quant. Anal.

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We survey theoretical and empirical research on antitakeover provisions, focusing on the relation between antitakeover provisions and shareholder value. We divide the empirical studies based upon the evidence that they provide: short-term event studies, studies on performance and policy changes around adopting antitakeover provisions or passing state antitakeover laws, studies on the impact of antitakeover provisions on takeovers, studies on the relation between antitakeover provisions and firm characteristics, and long-term studies on the relation between antitakeover provisions and firm performance or policies. We also discuss the place of antitakeover provisions in the current debate about "good governance" practices.

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“…While early evidence on the effectiveness of shareholder activism is mixed, more recent studies document a stronger effect of proposals (Guo et al 2008;Thomas and Cotter 2007;Ertimur et al 2010;Ertimur et al 2011). Harper Ho (2016 finds that proposals have become a more is an indicator variable that is equal to one if the firm is targeted by a political spending-related shareholder proposal sponsored by a union pension fund or public pension fund in year t; the control sample comprises firms targeted by a political spending-related shareholder proposal sponsored by an individual, faith-based organization, institutional investor, or other shareholder group in year t. For definitions of independent variables and data sources, see Appendix 3.…”

Section: Implementation Of Corporate Political Spending-related Propomentioning

confidence: 99%

“…Next, we examine implementation rates for proposals. In contrast with studies that focus exclusively on proposals that go to vote (Thomas and Cotter 2007;Guo et al 2008;Ertimur et al 2010;Cai and Walking 2011;Ertimur et al 2011) or proposals that are withdrawn (Chidambaran and Woidtke 1999;Bauer et al 2015), we analyze both paths and the relative success of each. Prior research suggests that proposals are part of an ongoing negotiation between activists and management, with proposals going to vote when compromise cannot be reached (Chidambaran and Woidtke 1999).…”

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confidence: 99%

Shareholder Activism and Voluntary Disclosure Initiation: The Case of Political Spending

Baloria

Klassen

Wiedman

2019

Contemporary Accting Res

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Demand for disclosures on environmental, social, and governance (ESG) issues has increased dramatically. Using corporate political spending disclosures as our setting, we conduct a detailed inquiry of 541 political spending‐related shareholder proposals from 2004 to 2012 to highlight the role of shareholder activism as a mechanism to motivate ESG disclosure. Unlike earlier studies, we examine both proposals that went to a vote and proposals that were withdrawn by the activist, allowing us to assess more comprehensively the success of shareholder activism. We find that 20 percent of firms targeted by disclosure proposals begin disclosing in the subsequent year, although implementation rates vary by proposal type—8 percent for proposals subject to a vote versus 56 percent for proposals withdrawn. The sponsor is also important: unions and public pension funds are less likely than other activists to target firms with agency problems and are less successful in having proposals withdrawn, and the implementations they obtain are viewed more negatively by the broader investor base. Our findings highlight shareholder proposals as one mechanism through which investors can successfully express their preferences for corporate disclosure policies. Given activists' long‐standing interest in environmental and social disclosure policies, we believe our findings generalize to a broader set of ESG disclosures.

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Undoing the Powerful Anti-Takeover Force of Staggered Boards

Cited by 33 publications

References 43 publications

CEO Power and Risk Taking: Evidence from the Subprime Lending Industry

CEO Power and Risk Taking: Evidence from the Subprime Lending Industry

Antitakeover Provisions and Shareholder Wealth: A Survey of the Literature

Shareholder Activism and Voluntary Disclosure Initiation: The Case of Political Spending

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