Board monitoring and antitakeover amendments

This study examines the joint influence of board composition, leadership structure, and board ownership structure on the market's reaction to corporate antitakeover amendment proposals, The stock price reaction to antitakeover amendments is more negative when the board is dominated by inside and affiliated outside board members. Further, for firms in which the CEO also chairs the board, the reaction becomes increasingly negative as inside and affiliated outside board members increase their ownership stake in the firm and proportional representation on the board. In contrast, board composition and ownership structure have little power to explain the stock price reaction when the CEO does not chair the board. We conclude that monitoring by outside independent board members is important particularly when the CEO is also the board chair.