Staggered boards, agency costs and stock price crash risk: Evidence from China

• Published in: Research in international business and finance Vol. 71; p. 102489
• Main Authors: Mbanyele, William, Huang, Hongyun
• Format: Journal Article
• Language: English
• Published: Elsevier B.V 01.08.2024
• Subjects: agency costs; bad news hoarding; Staggered board; stock price crash risk; Staggered board; M120; G30; stock price crash risk; agency costs; G340; bad news hoarding
• ISSN: 0275-5319
• DOI: 10.1016/j.ribaf.2024.102489

In this study, we leverage unique, hand-collected data to explore the impact of staggered boards on the likelihood of future stock price crashes. Our analysis shows that companies with staggered boards are at a higher risk of future stock price crashes compared to their counterparts with non-staggered boards, particularly in firms with elevated agency costs and those not state-owned. Additionally, we find that staggered boards exacerbate this risk by failing in their monitoring and advisory capacities. Evidence of this failure emerges through various indicators of diminished oversight, including managerial opportunism, financial reporting manipulation, insider trading, and a rise in both investment and operational inefficiencies. This study not only contributes to the ongoing debate about the implications of staggered boards but also sheds new light on the associated agency costs. [Display omitted] •Listed companies with staggered boards have higher future stock price crash risk.•This impact is more pronounced for firms with higher agency costs and private firms.•Staggered boards are associated with higher financial reporting manipulation.•Staggered board firms suffer from investment and operational inefficiencies.•We shed new evidence on the potential agency costs of staggered boards.