We explore the effect of corporate opacity on the relation between staggered boards and firm value. We find that through mitigating takeover pressure, staggered boards become increasingly beneficial to firm value as opacity increases. In addition, we document that staggered boards reduce value only in transparent firms. Additional tests indicate that, as opacity increases, staggered boards bear an increasingly positive relation to research and development and CEO pay-performance sensitivity. Taken together, these results suggest that corporate opacity affects the value impact of takeover protection.

We test the relationship between takeover protection and voluntary disclosure in a setting of antitakeover laws in a firm’s state of incorporation. After correcting for the endogeneity of firms’ incorporation choices, we find that firms incorporated in states with more antitakeover laws have higher levels of voluntary disclosure and stock market liquidity. Further tests do not support shareholder demands being the driving force for this association. Our findings are consistent with takeover protection and poor disclosure serving as substitute mechanisms for deterring takeovers. Therefore, as antitakeover statutes mitigate takeover threats, they enhance managers’ incentives to disclose more in order to realize capital market benefits.