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Classified Boards and Managerial Entrenchment: Evidence from Seasoned Equity Offerings

Author

Listed:
  • Ranadeb Chaudhuri

    (Department of Accounting and Finance, Oakland University, U.S.A.)

  • Hoontaek Seo

    (Commerce Department, Niagara University, U.S.A.)

Abstract

We investigate the effect of classified boards on the market reaction to seasoned equity offering (SEO) announcements and the operating performance following SEOs. We find that firms with classified boards on average earn lower SEO announcement returns and have worse abnormal operating performance following SEOs relative to firms with unitary boards. Our results support the view that classified boards entrench managers and are ineffective in preventing them from misusing funds raised in SEOs.

Suggested Citation

  • Ranadeb Chaudhuri & Hoontaek Seo, 2010. "Classified Boards and Managerial Entrenchment: Evidence from Seasoned Equity Offerings," International Journal of Business and Economics, School of Management Development, Feng Chia University, Taichung, Taiwan, vol. 9(1), pages 29-43, April.
    • Handle: RePEc:ijb:journl:v:9:y:2010:i:1:p:29-43
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    classified boards; secondary equity offering; managerial entrenchment;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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