Impact of Classified Board on M&A Target Shareholder Value: Nurturing Innovation through Entrenchment
- Authors
- Kim, Chaehyun; Kang, Shinwoo; Shim, Hyeongsop
- Issue Date
- Mar-2020
- Publisher
- WILEY
- Citation
- INTERNATIONAL REVIEW OF FINANCE, v.20, no.1, pp.261 - 273
- Journal Title
- INTERNATIONAL REVIEW OF FINANCE
- Volume
- 20
- Number
- 1
- Start Page
- 261
- End Page
- 273
- URI
- https://scholarworks.bwise.kr/gachon/handle/2020.sw.gachon/26087
- DOI
- 10.1111/irfi.12205
- ISSN
- 1369-412X
- Abstract
- We find that classified board in the M&A target firm is positively related to the target shareholder value, but only for firms with both intensive R&D investment and strong external governance. We also find that firms with classified board exhibit superior quality innovation when they have both intensive R&D investment and strong external governance. These findings are consistent with the view that classified board provides long-term perspectives that promote productive but risky R&D investment, which is highly valued in M&A. Our findings are distinct from the view expressed in extant literature that classified board enhances target shareholder value because of stronger bargaining power.
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