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Is the Staggered Board Debate Really Settled?

The debate over staggered boards is heating up, largely because of the appearance of novel studies—including our own prior research—that challenge the results of earlier works documenting a negative impact of staggered boards on firm value. Meanwhile, a third way has appeared in this debate. In a recent article in the University of Pennsylvania Law Review, Settling the Staggered Board Debate, Professors Amihud, Schmid, and Davidoff Solomon (ASDS) purport to settle this debate, arguing that neither the position in favor or against staggered boards “has empirical support and, on average, a staggered board has no significant effect on firm value.”

This Essay addresses the ASDS study and shows that the staggered board debate is very much alive rather than settled. It does so in two ways. First, it shows that our prior result that the adoption of a staggered board is associated with a positive increase in firm value is robust to the criticism in ASDS. Second, this Essay shows that ASDS’s conclusion that staggered boards have no significant association with firm value is based on statistical tests that have “poor power,” that is, tests that are unlikely to find a robust association even if such association is actually supported by the data. In contrast, the tests that indicate that our earlier results are robust have both much better statistical power and good “size,” making it unlikely that we can find a positive association between staggered boards and firm value if no such association exists in the data.