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Board directors' preferences: What are good aggregation rules?

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  • Duran, Mihael

Abstract

I analyze how boards of directors with heterogeneous preferences can affect the information shared with the CEO with the help of a cheap-talk model that allows for large groups of receivers. This paper provides new insights on how heterogeneity of boards can change the way of communication between the board and the CEO, related to different ways of decision making. My model gives some insights how heterogeneous preferences can have an impact on how communication between CEO and the board of directors takes place. I also indicate how coalition forming in the boardroom can be influenced by director's and CEO's perferences. Finnaly this model gives a possible answer why board of directors hetreogeneity differs even for shareholder representatives if there are any empoyees on the board. --

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Bibliographic Info

Paper provided by University of Tuebingen, Faculty of Economics and Social Sciences in its series University of Tuebingen Working Papers in Economics and Finance with number 57.

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Date of creation: 2013
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Handle: RePEc:zbw:tuewef:57

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Related research

Keywords: Board of directors; Cheap talk; Director's preferences; Heterogeneity; Multiple audiences;

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  1. repec:fth:stanho:e-89-7 is not listed on IDEAS
  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. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-23, December.
  4. Crawford, Vincent P & Sobel, Joel, 1982. "Strategic Information Transmission," Econometrica, Econometric Society, vol. 50(6), pages 1431-51, November.
  5. Spector, David, 2000. "Pure communication between agents with close preferences," Economics Letters, Elsevier, vol. 66(2), pages 171-178, February.
  6. Maria Goltsman & Gregory Pavlov, 2008. "How to Talk to Multiple Audiences," UWO Department of Economics Working Papers 20081, University of Western Ontario, Department of Economics.
  7. Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02.
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