IDEAS home Printed from https://ideas.repec.org/p/ysm/somwrk/ysm75.html
   My bibliography  Save this paper

The Active Board of Directors and Improved Performance of the Large Publicly-Traded Corporation

Author

Listed:
  • Paul W. MacAvoy

    (School of Management)

  • Ira M. Millstein

    (General)

Abstract

Our working hypothesis is that a professional board which is independent of management should tip the scales in favor of higher returns to investors. Although this hypothesis is amply supported by observation and reasonable assumptions, no detailed analysis of corporate relative performance has been undertaken. Here we define returns to investors as the achievement of "economic profit," ie., operating earnings in excess of the costs of capital, and we posit the presence/absence of a professional board for each corporation in a reasonably comprehensive sample of large corporations. An empirical study based on such reasonable studies and 1991- 1995 data demonstrates that the added returns to investors associated with the presence of a professional board are positive and significant. Corporations with active and independent boards appear to have performed much better in the 1990s than those with passive boards.

Suggested Citation

  • Paul W. MacAvoy & Ira M. Millstein, 1997. "The Active Board of Directors and Improved Performance of the Large Publicly-Traded Corporation," Yale School of Management Working Papers ysm75, Yale School of Management.
    • Handle: RePEc:ysm:somwrk:ysm75
    as

    Download full text from publisher

    File URL: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=10707
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Guo, Hong & Li, Wanli & Zhong, Yuxiang, 2019. "Political involvement and firm performance — Chinese setting and cross-country evidence," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 59(C), pages 218-231.

    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ysm:somwrk:ysm75. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/smyalus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.