Director co-option and monitoring efficiency. (c2017)
This paper examines the impact of director co-option on the relationship between board structures and monitoring efficiency. We show that co-opted independent directors deflate the turnover-performance sensitivity, amplify CEO pay, and increase the likelihood of CEO duality. While non-co-opted indep...
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| Format: | masterThesis |
| Published: |
2017
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| Online Access: | http://hdl.handle.net/10725/6734 https://doi.org/10.26756/th.2017.28 http://libraries.lau.edu.lb/research/laur/terms-of-use/thesis.php |
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| Summary: | This paper examines the impact of director co-option on the relationship between board structures and monitoring efficiency. We show that co-opted independent directors deflate the turnover-performance sensitivity, amplify CEO pay, and increase the likelihood of CEO duality. While non-co-opted independent directors enhance internal monitoring, co-opted independent board members are the worst monitors. We generally do not observe a substantial difference in the monitoring functionality of co-opted and non-co-opted inside board members. Our findings suggest that co-opted independent directors are the main driving factor behind the converse association between co-opted boards and internal monitoring. In addition, we suggest that independent directors appointed after the CEO resumes office are particularly costly to firms since they promote a non-efficient board monitoring environment. |
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