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Boards of Directors and Firm Performance: is there an expectations gap?

Listed author(s):
  • Niamh Brennan

Reflecting investor expectations, most prior corporate governance research attempts to find a relationship between boards of directors and firm performance. This paper critically examines the premise on which this research is based. An expectations gap approach is applied for the first time to implicit expectations which assume a relationship between firm performance and company boards. An expectations gap has two elements: a reasonableness gap and a performance gap. Seven aspects of boards are identified as leading to a reasonableness gap. Five aspects of boards are identified as leading to a performance gap. The paper concludes by suggesting avenues for empirically testing some of the concepts discussed in this paper. Copyright (c) 2006 The Author; Journal compilation (c) 2006 Blackwell Publishing Ltd.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-8683.2006.00534.x
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Article provided by Wiley Blackwell in its journal Corporate Governance: An International Review.

Volume (Year): 14 (2006)
Issue (Month): 6 (November)
Pages: 577-593

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Handle: RePEc:bla:corgov:v:14:y:2006:i:6:p:577-593
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  1. Eric Friedman & Simon Johnson & Peter Boone & Alasdair Breach, 1999. "Corporate Governance in the Asian Financial Crisis," Departmental Working Papers 199920, Rutgers University, Department of Economics.
  2. Karen Cravens & Wanda Wallace, 2001. "A Framework for Determining the Influence of the Corporate Board of Directors in Accounting Studies," Corporate Governance: An International Review, Wiley Blackwell, vol. 9(1), pages 2-24, 01.
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  8. Stiles, Philip & Taylor, Bernard, 2001. "Boards at Work: How Directors View their Roles and Responsibilities," OUP Catalogue, Oxford University Press, number 9780198288763, December.
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  10. K. J. Martijn Cremers & Vinay B. Nair, 2005. "Governance Mechanisms and Equity Prices," Journal of Finance, American Finance Association, vol. 60(6), pages 2859-2894, December.
  11. John E. Core & Wayne R. Guay & Tjomme O. Rusticus, 2006. "Does Weak Governance Cause Weak Stock Returns? An Examination of Firm Operating Performance and Investors' Expectations," Journal of Finance, American Finance Association, vol. 61(2), pages 655-687, 04.
  12. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-325, June.
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  15. Romano, Roberta, 1996. "Corporate Law and Corporate Governance," Industrial and Corporate Change, Oxford University Press, vol. 5(2), pages 277-339.
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