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| Volume 9, No. 1,
April 2010 |
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Classified Boards and
Managerial Entrenchment: |
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Evidence from Seasoned Equity
Offerings |
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Ranadeb Chaudhuri |
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Department of Accounting and
Finance, Oakland University, U.S.A. |
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Hoontaek Seo |
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Commerce Department, Niagara
University, U.S.A. |
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| Abstract |
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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. |
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Key words:
classified boards; secondary equity offering; managerial
entrenchment |
| JEL
classification:
G31; G32; G34 |
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