Abstract
This study investigates the dual role of staggered boards in mergers and acquisitions, exploring their potential as both a governance shield and a mechanism for managerial entrenchment. We document that bidders with staggered board structures experience negative cumulative abnormal returns at announcement. We support the managerial entrenchment view that staggered boards are associated with suboptimal deals, destroying shareholder value at announcement and the long run. We further reveal that this negative relationship is mitigated by strong internal and external monitoring mechanisms, including organizational capital, corporate social responsibility, board gender diversity, managerial ability, institutional ownership, and analyst following. Notably, CEO religiosity emerges as a factor that dampens the detrimental impact of staggered boards, suggesting that personal values can influence managerial decision-making in acquisitions. We also document that bidders with staggered boards tend to pay higher takeover premiums, take longer to complete deals, and are less likely to pursue partial acquisitions, highlighting the complex and multifaceted role of these boards. In addition, such bidders are more likely to engage in public acquisitions and less likely to pursue related-industry deals. Our results are robust to alternative measures of bidder performance, subsample analyses, additional control variables, and endogeneity tests. This study provides valuable insights for regulators and policymakers, emphasizing the complex interplay between governance structures and acquisition outcomes.