Co-opted Boards

• Autores: Jeffrey L. Coles, Naveen D. Daniel, Lalitha Naveen
• Localización: Review of Financial Studies, ISSN-e 1465-7368, Vol. 27, Nº. 6, 2014, págs. 1751-1796
• Idioma: inglés
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• Dialnet Métricas: 5 Citas
• Resumen

  • We develop two measures of board composition to investigate whether directors appointed by the CEO have allegiance to the CEO and decrease their monitoring. Co-option is the fraction of the board comprised of directors appointed after the CEO assumed office. As Co-option increases, board monitoring decreases: turnover-performance sensitivity diminishes, pay increases (without commensurate increase in pay-performance sensitivity), and investment increases. Non-Co-opted Independence�the fraction of directors who are independent and were appointed before the CEO�has more explanatory power for monitoring effectiveness than the conventional measure of board independence. Our results suggest that not all independent directors are effective monitors.