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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.
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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

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