Board Declassification Activism: Why Run From the Evidence?

In a recently released study, we examined the value implications of board declassifications promoted by the Harvard Law School Shareholder Rights Project (“SRP study”). In a May 2017 note, Lucian Bebchuk and Alma Cohen “contest” the results in our study. In our reply, “Board Declassification Activism: Why Run Away from the Evidence?” we show that the Bebchuk-Cohen critique is not only unwarranted, but also fails to engage with our study’s central finding: that the declassification activism of the Shareholder Rights Project (“SRP”) was followed by substantial declines in firm value of from $90 billion to $149 billion.

For … Read more

What Matters in Governance?

In the past 20 years, many corporate law scholars have come to the view that governance arrangements protecting incumbents from removal are what really matter for firm value, arguing that such arrangements help entrench managers and harm shareholders. A major factor supporting this view has been the rise of empirical studies using corporate governance indices to measure a firm’s governance quality. Providing seemingly objective evidence that protecting incumbents from removal reduces firm value, these studies have encouraged the idea that good corporate governance is equivalent to stronger shareholder rights.

In our recent article, we challenge this idea, presenting new empirical … Read more

Staggered Boards and Long-Term Firm Value, Revisited

For a long time, the academic literature has largely supported the view that staggered boards — which require challengers to win at least two election cycles to gain a board majority — entrench directors and managers to the detriment of shareholders.[1] Empirically, this view was based on the finding of a negative association between having a staggered board and firm value. In our new article, “Staggered Boards and Long-Term Firm Value, Revisited,” forthcoming in the Journal of Financial Economics, we reconsider the staggered board debate using a comprehensive sample period (1978–2015) and document evidence that suggests the … Read more