We study the effect of staggered boards on long-run firm value using a natural experiment: a 1990 law that imposed a staggered board on all firms incorporated in Massachusetts. We find a significant and positive average (and median) increase in Tobins Q for innovating firms, particularly those facing greater Wall Street scrutiny. This increase in value appears to come, at least in part, from increased investment in R&D and capital expenditures and from valuable patents.
Our findings suggest that staggered boards can be beneficial when firms and investors face information asymmetries – when firms are young, innovating, and reliant on R&D.
Nicholas J. Chabraja Professor
Northwestern University School of Law and Kellogg School of Management
Andrew E. Furer Professor of Economics
Parker Professor of Comparative Corporate Law and Fuyo Professor of Japanese Law; Director