Can Staggered Boards Improve Value? Evidence from the Massachusetts Natural Experiment

Prof. Robert M. Daines (Stanford Law School) presents his paper on "Can Staggered Boards Improve Value? Evidence from the Massachusetts Natural Experiment" at the 2016 GCGC Conference in Stockholm. Discussion of the paper is then presented by Prof. Renee Adams (UNSW Business School, University of New South Wales). The full paper and slides from this presentation can be downloaded here: www.gcgc.global

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.