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The Active Board Of Directors And Its Effect On The Performance Of The Large Publicly Traded Corporation

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  • Paul W. MacAvoy
  • Ira M. Millstein
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    Abstract

    In recent years, boards of directors have become more active and independent of management in pursuing shareholder interests. But, up to this point, there has been little empirical evidence that active boards help companies produce higher rates of return for their shareholders. In this article, after describing the new board activism, the authors argue that past failures to document an association between independent boards and superior corporate performance can be explained by two features of the research: its concentration on periods prior to the 1990s (when most boards were largely irrelevant) and its use of unreliable proxies (such as a minimum percentage of outside directors) for a well-functioning board. 1999 Morgan Stanley.

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    Bibliographic Info

    Article provided by Morgan Stanley in its journal Journal of Applied Corporate Finance.

    Volume (Year): 11 (1999)
    Issue (Month): 4 ()
    Pages: 8-20

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    Handle: RePEc:bla:jacrfn:v:11:y:1999:i:4:p:8-20

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    Cited by:
    1. Ravina, Enrichetta & Sapienza, Paola, 2007. "What Do Independent Directors Know? Evidence from Their Trading," CEPR Discussion Papers 6046, C.E.P.R. Discussion Papers.
    2. Adams, Renee & Hermalin, Benjamin E. & Weisbach, Michael S., 2009. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Working Paper Series 2008-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    3. Paolo Santella & Giulia Paone & Carlo Drago, 2005. "How Independent are Independent Directors? The Case of Italy," Finance 0512026, EconWPA.
    4. Georges Dionne & Thouraya Triki, 2005. "Risk Management and Corporate Governance: the Importance of Independence and Financial Knowledge for the Board and the Audit Committee," Cahiers de recherche 0515, CIRPEE.
    5. Pollio, Gerald & Uchida, Koichi, 1999. "Management background, corporate governance and industrial restructuring: the Japanese upstream petroleum industry," Energy Policy, Elsevier, vol. 27(14), pages 813-832, December.
    6. Hunton, James E. & Rose, Jacob M., 2008. "Can directors' self-interests influence accounting choices?," Accounting, Organizations and Society, Elsevier, vol. 33(7-8), pages 783-800.
    7. Constantinos Chalevas & Christos Tzovas, 2010. "The effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financing: Evidence from Greece," Managerial Finance, Emerald Group Publishing, vol. 36(3), pages 257-277, March.
    8. Gleason, Kimberly C. & Madura, Jeff & Subrahmanyam, Vijaya, 2007. "Stock exchange governance initiatives: Evidence from the Italian STARs," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 141-159, January.
    9. Damon Fleming & Chee Chow & Wenbing Su, 2010. "An Exploratory Study of Chinese Accounting Students’ and Auditors’ Audit-specific Ethical Reasoning," Journal of Business Ethics, Springer, vol. 94(3), pages 353-369, July.
    10. Paolo, Santella & Carlo, Drago & Giulia, Paone, 2007. "Who cares about Director Independence?," MPRA Paper 2288, University Library of Munich, Germany.

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