The board of directors and dual-class recapitalizations

This paper examines stock price reactions to announcements of dual-class recapitalizations as they relate to characteristics of the board of directors. Our results show that certain board characteristics provide insight into directors' incentives. We differentiate characteristics of the board that are associated with management attempts to entrench its position and characteristics that may indicate an attempt to improve performance of the firm in the event of a takeover. We find that high levels of insider and affiliated outsider stock ownership, board tenure, and the presence of staggered board elections affect the stock market's reaction to these plans.