“ A Lapse of Concentration : Omitted Variables , Board Structure and Firm Performance ”

Previous analyses of the relationship between board structure and firm performance have not considered how that relationship is affected by external ownership concentration. This paper illustrates how, as a result of this omission, estimates of the impact of staggered boards on firm performance have been biased downward. Including external ownership concentration also allows for the first time an examination of the interactions of that variable and board structure, permitting more informative empirical tests of whether, and in what circumstances, effective staggered boards (ESBs) benefit shareholders. Evidence from those tests is consistent with the hypothesis that ESBs represent credible commitments on the part of shareholders not to act opportunistically, and so enhance firm performance.