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How do public companies adjust their board structures?

Listed author(s):
  • Cicero, David
  • Wintoki, M. Babajide
  • Yang, Tina
Registered author(s):

    We show that public companies frequently changed their board structures before implementation of the Sarbanes–Oxley Act, with two-thirds of firms changing board size or independence during an average two-year period. Board changes were associated with changes in firm-specific fundamentals, but the rate of change toward predicted structures was negatively associated with the level of CEO influence. Companies changed board structures in either direction as underlying firm fundamentals changed, consistent with the pursuit of economically efficient board structures. However, board changes have become less frequent since the Sarbanes–Oxley Act was enacted. We provide some evidence that companies became less likely to decrease board independence when changes in fundamentals suggested they should, which may reflect a loss of economic efficiency.

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    File URL: http://www.sciencedirect.com/science/article/pii/S0929119913000758
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    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 23 (2013)
    Issue (Month): C ()
    Pages: 108-127

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    Handle: RePEc:eee:corfin:v:23:y:2013:i:c:p:108-127
    DOI: 10.1016/j.jcorpfin.2013.08.001
    Contact details of provider: Web page: http://www.elsevier.com/locate/jcorpfin

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