We study how reputation incentives of influential independent directors (those holding multiple directorships) affect CEO compensation and firm financial reporting decisions. We find that CEO equity-based incentives, measured by CEO delta, vega and the number of equity grants are positively related to these directors' reputation incentives. These director reputation incentives also mitigate the perverse CEO incentives to inflate earnings, which arise from such high-powered compensation structures, by motivating increased board monitoring to limit discretionary accruals and real activity-based earnings management. These findings are invariant to endogeneity adjustments under multiple approaches, including exogenous changes in reputation incentives.

We document a novel strategic motive for family business groups to utilize their internal capital markets (ICMs) during financial crises. We find that crisis-period group ICM activity is targeted toward exerting product market dominance over standalone rivals. Groups make significant post-crisis gains in market share that are concentrated among affiliates (and industry segments within affiliates) operating in highly competitive product markets, where capturing such gains is difficult in normal times. These patterns are observed only in emerging markets, suggesting that ICMs enable groups to exploit crises to realize long-term competitive advantages only when rivals face chronic financing frictions.