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Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation

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  • Anup Agrawal

    (Culverhouse College of Business, University of Alabama, Tuscaloosa, 35487-0224, AL, USA)

  • Tareque Nasser

    (2097 BB, 1301 Lovers Lane, College of Business Administration, Kansas State University, Manhattan, 66506, KS, USA)

Abstract

We find that the presence of independent directors who are blockholders (IDBs) in firms promotes better CEO contracting and monitoring, and higher firm valuation. Using a panel of about 11,500 firm-years with a unique, hand-collected dataset on IDB-identity and a novel instrument, we find that firms with IDBs have lower excess CEO pay, lower flow and stock of CEO equity incentives, and higher valuations. These effects are substantial and robust. Our findings imply that by making it easier for blockholders to obtain a board seat, proxy access rules or bylaws can benefit shareholders.

Suggested Citation

  • Anup Agrawal & Tareque Nasser, 2019. "Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 9(03), pages 1-67, September.
    • Handle: RePEc:wsi:qjfxxx:v:09:y:2019:i:03:n:s2010139219500101
    DOI: 10.1142/S2010139219500101
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