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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. I also indicate how coalition forming in the boardroom can be influenced by heterogeneous preferences. Finally this model gives a possible answer why board of directors’ heterogeneity differs for shareholder representatives if there are any employees on the board.

Suggested Citation

  • Duran, Mihael, 2014. "Board directors’ preferences – What are good aggregation rules?," Finance Research Letters, Elsevier, vol. 11(2), pages 84-90.
  • Handle: RePEc:eee:finlet:v:11:y:2014:i:2:p:84-90
    DOI: 10.1016/j.frl.2014.02.002
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    1. Dittmann, I. & Maug, E. & Schneider, Christoph, 2010. "Bankers on boards of German firms : What they do, what they are worth, and why they are (still) there," Other publications TiSEM 610cf1b5-ae96-4112-9ff3-9, Tilburg University, School of Economics and Management.
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    4. Farrell, Joseph & Gibbons, Robert, 1989. "Cheap Talk with Two Audiences," American Economic Review, American Economic Association, vol. 79(5), pages 1214-1223, December.
    5. Balsmeier, Benjamin & Bermig, Andreas & Dilger, Alexander, 2013. "Corporate governance and employee power in the boardroom: An applied game theoretic analysis," Journal of Economic Behavior & Organization, Elsevier, vol. 91(C), pages 51-74.
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    15. Spector, David, 2000. "Pure communication between agents with close preferences," Economics Letters, Elsevier, vol. 66(2), pages 171-178, February.
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    Cited by:

    1. Duran, Mihael & Pull, Kerstin, 2014. "Der Beitrag der Arbeitnehmervertreter zur fachlichen und geschlechtlichen Diversitaet von Aufsichtsraeten: Erkenntnisse einer qualitativ-explorativen Analyse (Worker directors and supervisory board di," Industrielle Beziehungen - Zeitschrift fuer Arbeit, Organisation und Management - The German Journal of Industrial Relations, Rainer Hampp Verlag, vol. 21(4), pages 329-351.

    More about this item

    Keywords

    Board of directors; Cheap talk; Heterogeneity; Multiple audiences;

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • G3 - Financial Economics - - Corporate Finance and Governance
    • D7 - Microeconomics - - Analysis of Collective Decision-Making
    • M4 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting

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