Bottom-Up Corporate Governance
AbstractThis article empirically relates the internal organization of a firm with decision making quality and corporate performance. We call "independent from the CEO" a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of independent executives exhibit (1) a lower level of profitability and (2) lower shareholder returns following large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder friendly provisions. One interpretation is that "independently minded" top ranking executives act as a counter-power imposing strong discipline on their CEO, even though they are formally under his authority. Copyright 2013, Oxford University Press.
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Bibliographic InfoArticle provided by European Finance Association in its journal Review of Finance.
Volume (Year): 17 (2013)
Issue (Month): 1 ()
Other versions of this item:
- Landier, Augustin & Sauvagnat, Julien & Sraer, David & Thesmar, David, 2013. "Bottom-up Corporate Governance," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- Landier, Augustin & Sraer, David & Thesmar, David, 2006. "Bottom-Up Corporate Governance," CEPR Discussion Papers 5500, C.E.P.R. Discussion Papers.
- Augustin Landier & David Sraer & David Thesmar, 2005. "Bottom-Up Corporate Governance," Working Papers 2005-30, Centre de Recherche en Economie et Statistique.
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
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