Do Classified Boards Deter Takeovers? Evidence from Merger Waves

We exploit the arrival of industry-wide synergistic merger waves to identify whether classifiedboards deter takeover bids. In a stylized model, we show that when target classified boards arecostly to bidders, their negative effect on takeover likelihood is more pronounced during mergerwaves. Consistent with this prediction, we find that board classification substantially reducesthe likelihood of receiving a takeover bid during merger waves, but has no meaningful effect onbid frequency in off-wave years. These effects are robust to controlling for other antitakeoverprovisions. Our findings provide direct evidence that classified boards effectively reduce a firm’sexposure to the takeover market