Journal of Accounting and Economics Vol. 44 No. 3 2007
The monitoring role of insiders
Abstract
Conventional wisdom suggests that giving monitored agents an oversight role may blunt the effectiveness of the monitoring process. In contrast, I show that less independent boards can sometimes be more effective at monitoring. Fully independent boards have incentives to shirk monitoring ex post, after the agents’ productive inputs are sunk, if the boards cannot commit ex ante to monitoring. However, boards with inside directors may have incentives to monitor the agents ex post. The demand for insiders thus arises endogenously as they allow boards to indirectly commit to monitoring and thereby facilitate the monitoring process.
- DOI
- 10.1016/j.jacceco.2007.04.003
- Volume
- 44
- Issue
- 3
- Pages
- 359-377
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref