Board declassification and bargaining power

Miroslava Straska and H. Gregory Waller

Journal of Banking & Finance, 2025, vol. 178, issue C

Abstract: We examine the relations between recent board declassifications, takeover activity and takeover gains over the period 2003–2014. We report that firms that declassified their boards in the previous five years are more likely to be a takeover target compared to firms whose boards remain classified. We also report that, once targeted, these firms receive lower takeover premiums and realize lower abnormal returns around the announcement of the transaction. Finally, we find that these firms obtain a smaller share of abnormal dollar merger gains. These results are consistent with the interpretation that firms that declassified their boards have lost some bargaining power in negotiating M&A transactions.

Keywords: Corporate governance; Merger and acquisition; Classified board; Staggered board (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:178:y:2025:i:c:s0378426625001104

DOI: 10.1016/j.jbankfin.2025.107490

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