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Communication in the boardroom

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  • Adams, Renée

    ()
    (University of Queensland)

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    Abstract

    Communication is at the core of good governance, yet, because of data constraints, research on boardroom communication is almost nonexistent. I examine communication in the boardroom using a survey of the entire population of directors and CEOs of publicly-traded firms in Sweden during 2006. The survey contained questions about information exchange, debate, the directors' relationship with management and directors' roles and was linked to firm and director characteristics. I received responses from 628 directors and CEOs representing all but 12.59% of publicly-traded firms. Amongst others the data suggests that a) directors vary in their perceptions of their roles and directors' roles affect their perceptions of communication, b) directors who agree more that they primarily monitor management consistently perceive that they contribute less to boardroom discussion than directors who agree that the CEO often asks them for advice, c) directors with a stronger personal relationship with management perceive their advisory role to be more important, and d) directors on larger boards perceive that they contribute less to boardroom discussions than directors on smaller boards. The results are robust to using Heckman selection techniques to address sample selection bias. Overall, the data suggest that monitoring alone may not be sufficient for good governance.

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    Bibliographic Info

    Paper provided by Institute for Financial Research in its series SIFR Research Report Series with number 61.

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    Length: 48 pages
    Date of creation: 15 Apr 2008
    Date of revision:
    Handle: RePEc:hhs:sifrwp:0061

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    Related research

    Keywords: Board of Directors; Board Effectiveness; Communication; Information; Survey Data;

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    References

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    1. Enrichetta Ravina & Paola Sapienza, 2006. "What Do Independent Directors Know? Evidence from Their Trading," NBER Working Papers 12765, National Bureau of Economic Research, Inc.
    2. Benjamin E. Hermalin & Michael S. Weisbach, 2003. "Boards of directors as an endogenously determined institution: a survey of the economic literature," Economic Policy Review, Federal Reserve Bank of New York, issue Apr, pages 7-26.
    3. Vafeas, Nikos, 1999. "Board meeting frequency and firm performance," Journal of Financial Economics, Elsevier, vol. 53(1), pages 113-142, July.
    4. Rafael La Porta & Florencio Lopez-De-Silanes & Andrei Shleifer, 1999. "Corporate Ownership Around the World," Journal of Finance, American Finance Association, vol. 54(2), pages 471-517, 04.
    5. Graham, John R. & Harvey, Campbell R., 2001. "The theory and practice of corporate finance: evidence from the field," Journal of Financial Economics, Elsevier, vol. 60(2-3), pages 187-243, May.
    6. Warther, Vincent A., 1998. "Board effectiveness and board dissent: A model of the board's relationship to management and shareholders," Journal of Corporate Finance, Elsevier, vol. 4(1), pages 53-70, March.
    7. Linck, James S. & Netter, Jeffry M. & Yang, Tina, 2008. "The determinants of board structure," Journal of Financial Economics, Elsevier, vol. 87(2), pages 308-328, February.
    8. Benjamin E. Hermalin & Michael S. Weisbach, 1996. "Endogenously Chosen Boards of Directors and Their Monitoring of the CEO," Working Papers _004, University of California at Berkeley, Haas School of Business.
    9. Raheja, Charu G., 2005. "Determinants of Board Size and Composition: A Theory of Corporate Boards," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 40(02), pages 283-306, June.
    10. Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, vol. 58(3), pages 1087-1112, 06.
    11. Brickley, James A. & Coles, Jeffrey L. & Jarrell, Gregg, 1997. "Leadership structure: Separating the CEO and Chairman of the Board," Journal of Corporate Finance, Elsevier, vol. 3(3), pages 189-220, June.
    12. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02.
    13. Andres Almazan & Javier Suarez, 2003. "Entrenchment and Severance Pay in Optimal Governance Structures," Journal of Finance, American Finance Association, vol. 58(2), pages 519-548, 04.
    14. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
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