Boards

Adams (2017): “”

Handbook of the Economics of Corporate Governance, Volume 1

• What do directors do? What is the relative importance of CEO hiring firing, approving acquisitions, strategic advice?
• How are boards structured? How have structures evolved over time, and how do they differ between the US and the rest of the world?
• What is the relationship between firm value and board size, board independence, staggered boards, and other characteristics?
• How do boards actually work? What is the role of subcommittees, and who sets the agenda?
• How does regulation affect board structure?
• What characteristics make for good directors?

Weisbach (1988): “” 

Giá máy bắn cáJournal of Financial Economics

• When a board has more independent directors, a CEO is more likely to depart after poor performance

Yermack (1996): “” 

Giá máy bắn cáJournal of Financial Economics

• When a board is smaller, a company has a higher valuation, its CEO’s pay is more sensitive to performance, and its CEO is more likely to depart after poor performance

Coles, Daniel, and Naveen (2008): “” 

Journal of Financial Economics

• There is no universally optimal board structure – one size doesn’t fit all
• Larger boards can be associated with higher company valuation – if the firm is complex (i.e. is diversified, large, and relies on debt financing) and the board size arises from a greater number of independent directors
• Inside directors can be associated with higher company valuation – if the firm is R&D-intensive, then firm-specific knowledge is more important

Fich and Shivdasani (2006): “” 

Giá máy bắn cáJournal of Finance

• When a board is busy (most outside directors have at least three directorships), a company has a lower valuation and is less profitable, and a CEO is less likely to depart after poor performance
• Independent directors are only valuable if they are not busy
• When a busy director departs, a company’s stock price goes up. If a director of firm A takes a board appointment at another firm B, firm A’s stock price falls

Coles, Daniel, and Naveen (2014): “” 

Giá máy bắn cáReview of Financial Studies

• Studies “co-opted” directors, who were appointed after the CEO assumed office The idea is that they are beholden to the CEO for their appointment and thus less likely to monitor him/her
• When a board has more co-opted directors, a CEO is less likely to depart after poor performance. The CEO’s pay is higher, but not more sensitive to performance
• The fraction of “independent and non-co-opted” directors is a better measure of board independence than the fraction of independent directors

Ahern and Dittmar (2012): “” 

Giá máy bắn cáQuarterly Journal of Economics

• Studies the 2003 Norwegian law that required boards to have a minimum of 40% of female directors
• The law caused stock prices to fall immediately and long-term valuations to decline. It also led to experienced boards, higher leverage, more acquisitions, and lower profitability
• To show causation rather than just correlation, the results compare “treated” firms (that had no female directors before the law, and so were more affected by it) to “control” firms (who already had female directors)