Board Declassification and Bargaining Power

Abstract

We examine the relations between recent board declassifications, takeover activity and takeover gains over the period 2003-2011. We report that firms that declassified their boards in the previous five years are more likely to be the target of a takeover than other firms. We also report that these firms receive lower takeover offers and realize lower abnormal returns around the announcement of the transaction. Additionally, the takeover bids received by these firms are more likely to result in a successful takeover. These results are consistent with the interpretation that firms that declassified their boards have lost some bargaining power.