Staggered boards, unequal voting rights, poison pills and innovation intensity: New evidence from the Asian markets

William Mbanyele

International Review of Law and Economics, 2021, vol. 65, issue C

Abstract: This study examines the impact of staggered boards, poison pills and unequal voting rights on corporate innovation intensity using a sample of listed firms in six Asian countries from 2010 to 2017. We analyze the differential effects of antitakeover provisions using the high order fixed effects panel data model that controls for firm fixed effects, industry-year fixed effects and country-year fixed effects. The propensity score matching is used to deal with possible endogeneity issues. This paper provides evidence that staggered boards impede R&D investments. In contrast we show that unequal voting rights and poison pill provisions have no significant effect on long term R&D investments. We also find that a combination of a staggered board and a poison pill provision discourages innovation investments. This study uncovers an economic mechanism on the differential effects of antitakeover provisions on R&D responsiveness to firm investment sets. Staggered boards decrease the sensitivity of R&D to the investment opportunity set, resulting to higher innovative inefficiency. The managerial moral hazard effect of staggered boards disproportionately contributes to low firm performance in innovative firms. This study provides evidence on the source of the efficiency loss from staggered boards by pointing to its governance role in promoting more inefficient allocation of R&D capital.

Keywords: Asia; Antitakeover provisions; Corporate governance; Innovation intensity; Staggered board; Unequal voting rights (search for similar items in EconPapers)
JEL-codes: G32 G34 K22 O31 O32 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:65:y:2021:i:c:s0144818820301836

DOI: 10.1016/j.irle.2020.105970

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