Hostname: page-component-848d4c4894-cjp7w Total loading time: 0 Render date: 2024-07-05T22:31:13.084Z Has data issue: false hasContentIssue false
  • English
  • Français

Board Monitoring and Antitakeover Amendments

Published online by Cambridge University Press:  06 April 2009

Victoria B. McWilliams  and
Nilanjan Sen
Victoria B. McWilliams
Affiliation:
School of Management, Arizona State University West, 4701 W. Thunderbird Rd., P.O. Box 37100, Phoenix, AZ 85069-7100.
Nilanjan Sen
Affiliation:
School of Management, Arizona State University West, 4701 W. Thunderbird Rd., P.O. Box 37100, Phoenix, AZ 85069-7100.
Get access Rights & Permissions [Opens in a new window]

Abstract

This study examines the joint influence of board composition, leadership structure, and board ownership structure on the market's reaction to corporate antitakeover amendment proposals. The stock price reaction to antitakeover amendments is more negative when the board is dominated by inside and affiliated outside board members. Further, for firms in which the CEO also chairs the board, the reaction becomes increasingly negative as inside and affiliated outside board members increase their ownership stake in the firm and proportional representation on the board. In contrast, board composition and ownership structure have little power to explain the stock price reaction when the CEO does not chair the board. We conclude that monitoring by outside independent board members is important particularly when the CEO is also the board chair.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 32 , Issue 4 , December 1997 , pp. 491 - 505
Copyright
Copyright © School of Business Administration, University of Washington 1997

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Agrawal, A., and Mandelker, G. N.. “Large Shareholders and the Monitoring of Managers: The Case of Antitakeover Charter Amendments.” Journal of Financial and Quantitative Analysis, 25 (1990), 143–161.CrossRefGoogle Scholar
Baliga, B. R.; Moyer, R. C.; and Rao, R. S.. “CEO Duality and Firm Performance: What's the Fuss?” Strategic Management Journal, 17 (1996), 41–53.3.0.CO;2-#>CrossRefGoogle Scholar
Baysinger, B., and Butler, H.. “Corporate Governance and the Board of Directors: Performance Effects of Changes in Board Composition.” Journal of Law, Economics, and Organization, 1 (1985), 101–124.Google Scholar
Bhagat, S., and Jefferis, R. H.. “Voting Power in the Proxy Process: The Case of Antitakeover Charter Amendments.” Journal of Financial Economics, 30 (1991), 193–225.CrossRefGoogle Scholar
Brickley, J. A.; Coles, J. L.; and Jarrell, G.. “Corporate Leadership Structure: On the Separation of the Positions of CEO and Chairman of the Board.” Journal of Corporate Finance (forthcoming 1997).CrossRefGoogle Scholar
Brickley, J. A.; Coles, J. L.; and Terry, R. L.. “Outside Directors and the Adoption of Poison Pills.” Journal of Financial Economics, 35 (1994), 371–390.CrossRefGoogle Scholar
Brown, S., and Warner, J.. “Using Daily Stock Returns: The Case of Event Studies.” Journal of Financial Economics, 14 (1985), 3–31.CrossRefGoogle Scholar
Byrd, J. W., and Hickman, K. A.. “Do Outside Directors Monitor Managers? Evidence from Tender Offer Bids.” Journal of Financial Economics, 32 (1992), 195–222.CrossRefGoogle Scholar
Carver, J.Boards That Make a Difference. San Francisco, CA: Jossey-Bass (1990).Google Scholar
Coles, J. W., and Hesterly, W. S.. “Leadership Structure and Board Composition: Trading Information for Independence.” Working Paper, School of Management, Arizona State Univ. West (1996).Google Scholar
Conover, W. J.Practical Nonparametric Statistics. Boston, MA: Little, Brown and Co. (1980).Google Scholar
DeAngelo, H., and Rice, E. M.. “Antitakeover Charter Amendments and Stockholder Wealth.” Journal of Financial Economics, 11 (1983), 329–359.CrossRefGoogle Scholar
Dodd, P. “The Market for Corporate Control and Stockholder Wealth.” Monograph and Thesis Series MERCMT-80-04, Managerial Economics Research Center, Graduate School of Management, Univ. of Rochester (1980).Google Scholar
Hollander, M., and Wolfe, D. A.. Nonparametric Statistical Methods. New York, NY: Wiley (1973).Google Scholar
Investor Responsibility Research Center, Inc. Corporate Governance Service Voting by Institutional Investors on Corporate Governance Questions 1984 Proxy Season. Washington, D.C. (1984).Google Scholar
Jarrell, G. A., and Poulsen, A. B.. “Shark Repellents and Stock Prices: The Effects of Antitakeover Amendments Since 1980.” Journal of Financial Economics, 19 (1987), 127–168.CrossRefGoogle Scholar
Lanen, W. N., and Thompson, R.. “Stock Price Reactions as Surrogates for the Net Cash Flow Effects of Corporate Policy Decisions.” Journal of Accounting and Economics, 10 (1988), 311–334.CrossRefGoogle Scholar
Linn, S. C., and McConnell, J. J.. “An Empirical Investigation of the Impact of Antitakeover Amendments on Common Stock Prices.” Journal of Financial Economics, 11 (1983), 361–400.CrossRefGoogle Scholar
Malatesta, P. H., and Walkling, R. A.. “Poison Pill Securities: Stockholder Wealth, Profitability, and Ownership Structure.” Journal of Financial Economics, 20 (1988), 347–376.CrossRefGoogle Scholar
McWilliams, V. B. “Managerial Share Ownership and the Stock Price Effects of Antitakeover Amendment Proposals.” Journal of Finance, 45 (1990), 1627–1640.CrossRefGoogle Scholar
Morck, R.; Shleifer, A.; and Vishny, R. W.. “Management Ownership and Market Valuation: An Empirical Analysis.” Journal of Financial Economics, 20 (1988), 293–315.CrossRefGoogle Scholar
Patell, J. “Corporate Forecasts of Earnings per Share and Stock Price Behavior: Empirical Tests.” Journal of Accounting Research, 14 (1976), 246–274.CrossRefGoogle Scholar
Shivdasani, A. “Board Composition, Ownership Structure, and Hostile Takeovers.” Journal of Accounting and Economics, 16 (1993), 167–198.CrossRefGoogle Scholar
Stulz, R. “Managerial Control of Voting Rights: Financing Policies and the Market for Corporate Control.” Journal of Financial Economics, 20 (1988), 25–54.CrossRefGoogle Scholar