A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.
- Topic classification is ongoing.
- Please kindly let me know [mingze.gao@mq.edu.au] in case of any errors.
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Results 145 resources
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This article presents a model of optimal control of corporate boards of directors. We determine when one would expect inside versus outside directors to control the board, when the controlling party will delegate decision-making to the other party, the extent of communication between the parties, and the number of outside directors. We show that shareholders can sometimes be better off with an insider-controlled board. We derive endogenous relationships among profits, board control, and the number of outside directors that call into question the usual interpretation of some documented empirical regularities.
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We examine which independent directors are held accountable when investors sue firms for financial and disclosure-related fraud. Investors can name independent directors as defendants in lawsuits, and they can vote against their reelection to express displeasure over the directors’ ineffectiveness at monitoring managers. In a sample of securities class action lawsuits from 1996 to 2010, about 11% of independent directors are named as defendants. The likelihood of being named is greater for audit committee members and directors who sell stock during the class period. Named directors receive more negative recommendations from Institutional Shareholder Services, a proxy advisory firm, and significantly more negative votes from shareholders than directors in a benchmark sample. They are also more likely than other independent directors to leave sued firms. Overall, shareholders use litigation along with director elections and director retention to hold some independent directors more accountable than others when firms experience financial fraud.
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This article investigates the effect of social ties between acquirers and targets on merger performance. We find that the extent of cross-firm social connection between directors and senior executives at the acquiring and the target firms has a significantly negative effect on the abnormal returns to the acquirer and to the combined entity upon merger announcement. Moreover, acquirer-target social ties significantly increase the likelihood that the target firm׳s chief executive officer (CEO) and a larger fraction of the target firm׳s pre-acquisition board of directors remain on the board of the combined firm after the merger. In addition, we find that acquirer CEOs are more likely to receive bonuses and are more richly compensated for completing mergers with targets that are highly connected to the acquiring firms, that acquisitions are more likely to take place between two firms that are well connected to each other through social ties, and that such acquisitions are more likely to subsequently be divested for performance-related reasons. Taken together, our results suggest that social ties between the acquirer and the target lead to poorer decision making and lower value creation for shareholders overall.
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This paper studies the advisory role of the board of directors in takeovers. I develop a model in which the takeover premium and the ability of the target board to resist the takeover are endogenous. The analysis relates the influence of the board on target shareholders and the reaction of the market to its recommendations to various characteristics of the acquirer and the target. I also show that the expected target shareholder value can decrease with the expertise of the board and it is maximized when the board is biased against the takeover. Generally, uninformative and ignored recommendations are not necessarily evidence that the target board has no influence on the outcome of the takeover. Perhaps surprisingly, under the optimal board structure, target shareholders ignore the recommendations of the board, which are never informative in equilibrium.
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Evaluating agency theory and optimal contracting theory views of corporate philanthropy, we find that as corporate giving increases, shareholders reduce their valuation of firm cash holdings. Dividend increases following the 2003 Tax Reform Act are associated with reduced corporate giving. Using a natural experiment, we find that corporate giving is positively (negatively) associated with CEO charity preferences (CEO shareholdings and corporate governance quality). Evidence from CEO-affiliated charity donations, market reactions to insider-affiliated donations, its relation to CEO compensation, and firm contributions to director-affiliated charities indicates that corporate donations advance CEO interests and suggests misuses of corporate resources that reduce firm value.
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Can algorithms assist firms in their decisions on nominating corporate directors? Directors predicted by algorithms to perform poorly indeed do perform poorly compared to a realistic pool of candidates in out-of-sample tests. Predictably bad directors are more likely to be male, accumulate more directorships, and have larger networks than the directors the algorithm would recommend in their place. Companies with weaker governance structures are more likely to nominate them. Our results suggest that machine learning holds promise for understanding the process by which governance structures are chosen and has potential to help real-world firms improve their governance.
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Busy directors have been widely criticized as being ineffective. However, we hypothesize that busy directors offer advantages for many firms. While busy directors may be less effective monitors, their experience and contacts arguably make them excellent advisors. Among IPO firms, which have minimal experience with public markets and likely rely heavily on their directors for advising, we find busy boards to be common and to contribute positively to firm value. Moreover, these positive effects of busy boards extend to all but the most established firms. Benefits are lowest among Forbes 500 firms, which likely require more monitoring than advising.
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Firms with busy boards, those in which a majority of outside directors hold three or more directorships, are associated with weak corporate governance. These firms exhibit lower market‐to‐book ratios, weaker profitability, and lower sensitivity of CEO turnover to firm performance. Independent but busy boards display CEO turnover‐performance sensitivities indistinguishable from those of inside‐dominated boards. Departures of busy outside directors generate positive abnormal returns (ARs). When directors become busy as a result of acquiring an additional directorship, other companies in which they hold board seats experience negative ARs. Busy outside directors are more likely to depart boards following poor performance.
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Using the firm-level corporate social responsibility (CSR) ratings of Kinder, Lydenberg, Domini, we find that firms score higher on CSR when they have Democratic rather than Republican founders, CEOs, and directors, and when they are headquartered in Democratic rather than Republican-leaning states. Democratic-leaning firms spend 20 million more on CSR than Republican-leaning firms (80 million more within the sample of S&P 500 firms), or roughly 10% of net income. We find no evidence that firms recover these expenditures through increased sales. Indeed, increases in firm CSR ratings are associated with negative future stock returns and declines in firm ROA, suggesting that any benefits to stakeholders from social responsibility come at the direct expense of firm value.
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Journals
Topic
- Director
- CEO (48)
- Mergers and Acquisitions (5)
- Bond (4)
- Capital Structure (1)
Resource type
- Journal Article (145)
Publication year
- Between 1900 and 1999 (15)
- Between 2000 and 2024 (130)