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In this paper, we empirically investigate how staggered boards influence brand innovations, as measured by the number and forward citations of new trademarks. We explore a quasi-natural experiment of legislation shocks in Massachusetts that forced the adoption of staggered boards in 1990 for the causal effect of staggered boards. We find that firms in Massachusetts generate significantly more and better brand innovations than similar firms in other states after 1990. The positive effect of staggered boards on brand innovations is stronger for firms with higher takeover vulnerability, with higher institutional ownership, and in industries with higher advertising expenditures. Such a positive effect is consistent with the long-term prospects of staggered boards, and is confirmed by treated firms’ better product quality after 1990.
First draft: September 24, 2019 This draft: October 27, 2020
Keyword: staggered board, brands, trademarks, investment, Massachusetts
JEL: K20, L10, M30, G32