Looking for an investment edge? Try companies with staggered boards, a new study suggests.
The study, by academic researchers, bucks two decades of research and wades into one of today’s fiercest boardroom battles.
Past studies have linked staggered boards, in which only one-third of director seats open up every year, to lower shareholder returns. And because these arrangements make a takeover less likely — a hostile bidder must win back-to-back annual elections to take control — prospects can be dimmer for a sale and the premium that can come with it.
But a new paper finds companies’ value actually increased over a five-year period when they moved from annual elections of directors to staggered ones. The study uses a value metric known as Tobin’s Q, which measures a company’s stock price against the cost to replace its assets.
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