Journal of Finance Vol. 68 No. 2 2013
Monitoring Managers: Does It Matter?
Abstract
We study how well‐incentivized boards monitor CEOs and whether monitoring improves performance. Using unique, detailed data on boards' information sets and decisions for a large sample of private equity–backed firms, we find that gathering information helps boards learn about CEO ability. “Soft” information plays a much larger role than hard data, such as the performance metrics that prior literature focuses on, and helps avoid firing a CEO for bad luck or in response to adverse external shocks. We show that governance reforms increase the effectiveness of board monitoring and establish a causal link between forced CEO turnover and performance improvements.
- DOI
- 10.1111/jofi.12004
- Volume
- 68
- Issue
- 2
- Pages
- 431-481
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref