Bottom-up Corporate Governance
AbstractIn many instances, 'independently-minded' top-ranking executives can impose strong discipline on their CEO, even though they are formally under his authority. This paper argues that the use of such a disciplining mechanism is a key feature of good corporate governance. We provide robust empirical evidence consistent with the fact that firms with high internal governance are more efficiently run. We empirically label as '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 after large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder-friendly provisions.
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Bibliographic InfoPaper provided by University of Toulouse 1 Capitole in its series Open Access publications from University of Toulouse 1 Capitole with number http://neeo.univ-tlse1.fr/3305/.
Date of creation: 2013
Date of revision:
Publication status: Published in Review of Finance (2013) v.17, p.161-201
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Other versions of this item:
- 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
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-01-07 (All new papers)
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