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Capital Structure, Staggered Boards, and Firm Value

Financial analysts journal, 2008-01, Vol.64 (1), p.49-60 [Peer Reviewed Journal]

Copyright 2008 CFA Institute ;Copyright CFA Institute Jan/Feb 2008 ;ISSN: 0015-198X ;EISSN: 1938-3312 ;DOI: 10.2469/faj.v64.n1.7 ;CODEN: FIAJA4

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Title:
Capital Structure, Staggered Boards, and Firm Value
Author: Jiraporn, Pornsit ; Liu, Yixin
Subjects: Agency theory ; Boards of directors ; Business structures ; Capital management ; Capital structure ; Corporate debt ; Corporate finance ; Corporate governance ; Debt ; Financial leverage ; Financial management ; Financial reporting ; Financing methods ; Firm value ; Impact analysis ; Leverage ; Regression analysis ; Shareholder meetings ; Shareholders ; Statistical significance ; Stockholders ; Studies ; U.S.A
Is Part Of: Financial analysts journal, 2008-01, Vol.64 (1), p.49-60
Description: Grounded in agency theory, this study investigates whether staggered boards (in which only a portion of directors are elected at one time) influence capital structure choices. Leverage has been argued and shown to alleviate agency costs. Because staggered boards can entrench inefficient managers, they may motivate managers to adopt a lower level of debt, thereby avoiding the disciplinary mechanisms associated with leverage. The empirical evidence supports this hypothesis, showing that firms with staggered boards are signiflcantly less lever aged than those with unitary boards (in which all board members are elected at one time). The impact of staggered boards on capital structure choices exists both in industrial and regulated firms, although it seems to vanish after enactment of the Sarbanes-Oxley Act of 2002. The results show that staggered boards are likely to bring about, and do not merely reflect, lower leverage. Finally, the results demonstrate no significant adverse impact on firm value as a resuit of excess leverage.
Publisher: Charlottesville: CFA Institute
Language: English
Identifier: ISSN: 0015-198X
EISSN: 1938-3312
DOI: 10.2469/faj.v64.n1.7
CODEN: FIAJA4
Source: ProQuest Central

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Capital Structure, Staggered Boards, and Firm Value

Copyright 2008 CFA Institute ;Copyright CFA Institute Jan/Feb 2008 ;ISSN: 0015-198X ;EISSN: 1938-3312 ;DOI: 10.2469/faj.v64.n1.7 ;CODEN: FIAJA4

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