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118
The role of boards of directors in corporate governance: a conceptual framework and survey
- Journal of Economic Literature
, 2010
"... This paper is a survey of the literature on boards of directors, with an emphasis on ..."
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Cited by 111 (4 self)
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This paper is a survey of the literature on boards of directors, with an emphasis on
2010. Executive Compensation: A New View from a Long-term Perspective
- Review of Financial Studies 23:2099–138
, 1936
"... We analyze the long-run trends in executive compensation using a new dataset of top offi-cers of large firms from 1936 to 2005. The median real value of compensation was remark-ably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. By contras ..."
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Cited by 79 (1 self)
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We analyze the long-run trends in executive compensation using a new dataset of top offi-cers of large firms from 1936 to 2005. The median real value of compensation was remark-ably flat from the late 1940s to the 1970s, revealing a weak relationship between pay and aggregate firm growth. By contrast, this correlation was much stronger in the past thirty years. This historical perspective also suggests that compensation arrangements have often helped to align managerial incentives with those of shareholders because executive wealth was sensitive to firm performance for most of our sample. These new facts pose a challenge to several common explanations for the rise in executive pay since the 1980s. (JEL G30, J33, M52, N32) The compensation paid to CEOs of large publicly traded corporations rose dramatically during the 1980s and 1990s, stimulating much debate on the de-terminants of managerial pay (Murphy 1999; Hall and Murphy 2003). The discussion has been largely inconclusive, in part because readily available data only exist for the time period after 1970. By constructing a new long-run time series on executive pay, we are able to consistently document the trends in the level and structure of pay over most of the twentieth century. This historical perspective reveals several new facts that contrast sharply with data from re-cent decades, allowing us to reassess some of the most popular explanations for the recent surge in compensation. Although the stylized facts on executive pay since the 1970s are well estab-lished, only a handful of studies analyzed managerial compensation prior to
Tradeoffs in corporate governance: Evidence from board structures and charter provisions, Working Paper (June), University of Texas at Austin; Available at SSRN: http://ssrn.com/abstract=917544
, 2006
"... We provide arguments and present evidence that corporate governance structures are composed of interrelated mechanisms, which are in turn endogenous responses to the costs and benefits firms face when they choose those mechanisms. Examining board structures and the use of corporate charter provision ..."
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Cited by 19 (2 self)
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We provide arguments and present evidence that corporate governance structures are composed of interrelated mechanisms, which are in turn endogenous responses to the costs and benefits firms face when they choose those mechanisms. Examining board structures and the use of corporate charter provisions in a sample of more than 2,300 firms over a four-year period we find that firms cluster in their use of governance mechanisms. In particular, the set of charter provisions that firms use, as measured by the Gompers, Ishii, and Metrick (2003) G Index, is associated with board structure, with the laws of the state in which the firm is incorporated, and with firm and industry characteristics. We also find that some governance structures appear to serve as substitutes. Specifically, firms that have powerful boards (as measured by board independence) also have the greatest number of charter provisions, suggesting that the market for corporate control is less effective as a monitoring mechanism for these firms.
The determinants of board size and composition: Evidence from the UK.
- Journal of Corporate Finance,
, 2008
"... Abstract This paper examines the trends and determinants of board structure for a large sample of UK firms from 1981 to 2002. We extend the predominantly US based literature in a number of important ways. Firstly, a comparative analysis of the UK and US legal and institutional settings leads us to ..."
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Cited by 15 (2 self)
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Abstract This paper examines the trends and determinants of board structure for a large sample of UK firms from 1981 to 2002. We extend the predominantly US based literature in a number of important ways. Firstly, a comparative analysis of the UK and US legal and institutional settings leads us to hypothesize that UK boards will play a weaker monitoring role and hence board structures will not be determined by monitoring related factors. Our evidence supports this conjecture, showing that board structure determinants differ in predictable ways across different institutional settings. Secondly, in contrast to recent US mandatory reforms, UK reforms have been voluntary. As such they provide an interesting comparison, being arguably more effective than a mandatory approach by allowing firms to choose board structures most appropriate for their own needs. Our results support this point of view. Although the UK reforms do have a significant impact on board structures, a large number of firms choose not to comply, and those that do appear to do so for strong economic reasons. The reforms also appear to reduce the ability of well performing CEOs to influence board structures. JEL classification: G32, G34
CEO compensation and board structure
- Journal of Finance
, 2009
"... In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking int ..."
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Cited by 14 (1 self)
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In response to corporate scandals in 2001 and 2002, major U.S. stock exchanges issued new board requirements to enhance board oversight. We find a significant decrease in CEO compensation for firms that were more affected by these requirements, compared with firms that were less affected, taking into account unobservable firm effects, time-varying industry effects, size, and performance. The decrease in compensation is particularly pronounced in the subset of affected firms with no outside blockholder on the board and in affected firms with low concentration of institutional investors. Our results suggest that the new board requirements affected CEO compensation decisions. IN MODERN CORPORATIONS, the decision of how to compensate the manager is dele-gated to the board of directors. In recent years, experts have debated the impor-tance of this delegation mechanism in affecting CEO compensation. On the one hand, many scholars point to the labor market for talent as the major force that determines the level and design of compensation contracts (e.g., Rosen (1990), Himmelberg and Hubbard (2000), Hubbard (2005), Gabaix and Landier (2008)). On the other hand, a number of scholars argue that the delegation mechanism has a crucial effect on CEO compensation, and that board decisions with re-spect to compensation can deviate considerably from labor market values (e.g.,
Corporate governance and institutional ownership
- Journal of Financial and Quantitative Analysis
, 2011
"... All in-text references underlined in blue are linked to publications on ResearchGate, letting you access and read them immediately. ..."
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Cited by 12 (0 self)
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All in-text references underlined in blue are linked to publications on ResearchGate, letting you access and read them immediately.
2011. ‘Board structure and price informativeness
- Journal of Financial Economics
"... We develop and test the hypothesis that private information incorporated into stock prices affects the structure of corporate boards. Stock price informativeness may be a complement to board monitoring, because the information revealed by prices can be used by directors to monitor management. But pr ..."
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Cited by 11 (0 self)
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We develop and test the hypothesis that private information incorporated into stock prices affects the structure of corporate boards. Stock price informativeness may be a complement to board monitoring, because the information revealed by prices can be used by directors to monitor management. But price informativeness may also be a substitute for board monitoring, because more informative prices can trigger external monitoring mechanisms, such as takeovers. We develop a simple model in which these two effects interact and show under which conditions one effect dominates the other. We examine these issues empirically using a large panel of U.S. firms. We find robust evidence for the substitution effect: Stock price informativeness, as measured by the probability of informed trading (PIN), is negatively related to board independence. Consistent with the model’s predictions, this relationship is particularly strong for firms exposed to external governance mechanisms (firms with few takeover defenses) and internal governance mechanisms (firms with a high concentration of institutional ownership), and firms for which firm-specific knowledge is relatively unimportant (firms with low R&D expenses). We address endogeneity concerns in a number of different ways and conclude that our results are unlikely to be driven by omitted variables or reverse causality. The results are also robust to using different measures of price informativeness (such as firm-specific return variation and price impact) and different proxies for board monitoring (such as director attendance and the number of board meetings). JEL classification: G32, G34
Corporate Governance Propagation Through Overlapping Directors. Working Paper MIT Sloan School of Management. Available at http://web.mit.edu/cbouwman/www/downloads/ BouwmanCorpGovPropagation.pdf
- Accessed on September
"... How are governance practices propagated across firms? This article proposes, and em-pirically verifies, that observed governance practices are partly the outcome of network effects among firms with common directors. While firms attempt to select directors whose other directorships are at firms with ..."
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Cited by 8 (0 self)
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How are governance practices propagated across firms? This article proposes, and em-pirically verifies, that observed governance practices are partly the outcome of network effects among firms with common directors. While firms attempt to select directors whose other directorships are at firms with similar governance practices (“familiarity effect”), this matching of governance practices is imperfect because other factors also affect the director choice. This generates an “influence effect ” as directors acquainted with differ-ent practices at other firms influence the firm’s governance to move toward the prac-tices of those other firms. These network effects cause governance practices to converge. (JEL D80, G32, G34, R10) Firms, even those that are publicly traded, operate with widely differing cor-porate governance practices. The theoretical governance literature has pro-vided some insights into the determinants of corporate governance practices such as board size (e.g., Raheja 2005), the fraction of outside directors (e.g., Hermalin and Weisbach 1998), CEO duality (e.g., Jensen 1993), and execu-tive compensation (e.g., Garvey and Milbourn 2006). There is, however, still
Separation of Ownership and Control: Implications for Board Composition
- Journal of Risk and Insurance
, 2010
"... 1 ..."
The Changing of the Boards: The Value Effect of a Massive Exogenous Shock
- Quarterly Journal of Economics
, 2012
"... In 2003, a new law required that 40 percent of Norwegian firms ’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We f ..."
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In 2003, a new law required that 40 percent of Norwegian firms ’ directors be women – at the time only nine percent of directors were women. We use the pre-quota cross-sectional variation in female board representation to instrument for exogenous changes to corporate boards following the quota. We find that the constraint imposed by the quota caused a significant drop in the stock price at the announcement of the law and a large decline in Tobin’s Q over the following years, consistent with the idea that firms choose boards to maximize value. The quota led to younger and less experienced boards, increases in leverage and
