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444
MANAGING WITH STYLE: THE EFFECT OF MANAGERS ON FIRM POLICIES
, 2003
"... This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corpora ..."
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Cited by 251 (7 self)
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This paper investigates whether and how individual managers affect corporate behavior and performance. We construct a manager-firm matched panel data set which enables us to track the top managers across different firms over time. We find that manager fixed effects matter for a wide range of corporate decisions. A significant extent of the heterogeneity in investment, financial and organizational practices of firms can be explained by the presence of manager fixed effects. We identify specific patterns in managerial decision making that appear to indicate general differences in “style” across managers. Moreover, we show that management style is significantly related to manager fixed effects in performance and that managers with higher performance fixed effects receive higher compensation and are more likely to be found in better governed firms. In a final step, we tie back these findings to observable managerial characteristics. We find that executives from earlier birth cohorts appear on average to be more conservative; on the other hand, managers who hold an MBA degree seem to follow on average more aggressive strategies.
Pay without performance: The unfulfilled promise of executive compensation.
, 2004
"... ). The book provides a detailed account of how structural flaws in corporate governance have enabled managers to influence their own pay and have produced widespread distortions in pay arrangements. The book also examines how these flaws and distortions can best be addressed. Part IV of the book di ..."
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Cited by 233 (6 self)
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). The book provides a detailed account of how structural flaws in corporate governance have enabled managers to influence their own pay and have produced widespread distortions in pay arrangements. The book also examines how these flaws and distortions can best be addressed. Part IV of the book discusses how executive compensation -and corporate governance more generally -can be improved. We examine the extent to which pay arrangements can be improved by adopting board process rules, imposing shareholder approval requirements, and making pay more transparent. We conclude that problems with compensation arrangements cannot be fully addressed without ensuring that directors focus on shareholder interests and operate at arm's length from the executives whose compensation they set. To achieve this result, we argue, it is not sufficient to make directors independent of executives as recent reforms has sought to do; it is also necessary to make directors dependent on shareholders by changing the legal arrangements that insulate boards from shareholders.
A theory of friendly boards
- Journal of Finance
, 2007
"... We analyze the consequences of the board’s dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade-off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more in ..."
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Cited by 198 (8 self)
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We analyze the consequences of the board’s dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade-off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management-friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis. Too much emphasis on monitoring tends to create a rift between non-executive and executive directors, whereas the more traditional job of forming strategy requires close collaboration. In both activities, though, independent directors face the same problem: they depend largely on the chief executive and the company’s management for information. (The Economist [February 10, 2001, p. 68], describing a survey by PriceWater-houseCoopers of British boards.)
The Uncertain Relationship between Board Composition and Firm Performance
- Business Lawyer
, 1999
"... We survey the evidence on the relationship between board composition and firm performance. Boards of directors of American public companies that have a majority of independent directors behave differently, in a number of ways, than boards without such a majority. Some of these differences appear to ..."
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Cited by 183 (2 self)
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We survey the evidence on the relationship between board composition and firm performance. Boards of directors of American public companies that have a majority of independent directors behave differently, in a number of ways, than boards without such a majority. Some of these differences appear to increase firm value; others may decrease firm value. Overall, within the range of board compositions present today in large public companies, there is no convincing evidence that greater board independence correlates with greater firm profitability or faster growth. In particular, there is no empirical support for current proposals that firms should have "supermajority-independent boards " with only one or two inside directors. To the contrary, there is some evidence that firms with supermajority-independent boards are less profitable than other firms. This suggests that it may be useful for firms to have a moderate number of inside directors (say three to five on an average-sized eleven member board). We offer some possible explanations for these results, based on board dynamics, the informational advantages possessed by inside (and, often, affiliated) directors, and the value of interaction between different types of directors who bring different strengths to the board. published in
Why do firms use incentives that have no incentive effects
- Journal of Finance
, 2004
"... This work is distributed as a Discussion Paper by the ..."
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Cited by 152 (7 self)
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This work is distributed as a Discussion Paper by the
The motivation and impact of pension fund activism
- JOURNAL OF FINANCIAL ECONOMICS
, 1999
"... Pension funds have pursued an active role in corporate governance, although some question their effectiveness and motivations. We examine the impact and motivation of pension fund activism by studying the shareholder proposals of the largest, most active funds from 1987 through 1993. We find signifi ..."
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Cited by 145 (0 self)
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Pension funds have pursued an active role in corporate governance, although some question their effectiveness and motivations. We examine the impact and motivation of pension fund activism by studying the shareholder proposals of the largest, most active funds from 1987 through 1993. We find significant heterogeneity across funds in activism objectives, tactics, and impact on target firms, consistent with differing investment strategies. We find the funds are more successful at monitoring and promoting change in target firms than previously recognized. We also find no evidence to support motivations other than
Are busy boards effective monitors
- The Journal of Finance
, 2006
"... We present evidence that busy outside directors are associated with weak corporate governance based on a sample of U.S. industrial firms from 1989 to 1995. When a majority of outside directors serve on three or more boards, firms exhibit lower market-to-book ratios as well as weaker operating profit ..."
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Cited by 126 (2 self)
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We present evidence that busy outside directors are associated with weak corporate governance based on a sample of U.S. industrial firms from 1989 to 1995. When a majority of outside directors serve on three or more boards, firms exhibit lower market-to-book ratios as well as weaker operating profitability. Firms are also more likely to replace busy outside directors following poor performance. We show that when a majority of outside directors are busy, the sensitivity of CEO turnover to performance is significantly lower than when a majority of outside directors are not busy. Analysis of announcements of board changes confirms that investors applaud departures of busy outside directors, and this pattern is pronounced for firms where the departure results in the majority of the remaining outside directors being not busy.
The Determinants of Corporate Board Size and Composition: An Empirical Analysis
- The Calculus of Consent.” The University of Michigan Press, Ann Arbor, Michigan
, 2007
"... Abstract Several theories have been proposed to explain how corporate boards are structured. This paper groups these theories into four hypotheses and tests them empirically. We utilize a unique panel dataset that tracks corporate board development from the time of a firm's IPO through 10 year ..."
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Cited by 118 (0 self)
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Abstract Several theories have been proposed to explain how corporate boards are structured. This paper groups these theories into four hypotheses and tests them empirically. We utilize a unique panel dataset that tracks corporate board development from the time of a firm's IPO through 10 years later. The data support three distinct but mutually compatible hypotheses of board development: (i) board size and independence increase as firms grow in size and diversify over time; (ii) board independence is negatively related to the manager's influence and positively related to constraints on such influence; and (iii) board size reflects a trade-off between the firm-specific benefits of monitoring and the costs of such monitoring. The data do not support the view that boards are structured inefficiently or to facilitate managers' consumption of valuedecreasing private benefits. These results indicate that board structure does not result from a mechanical process that can easily be improved by uniform rules on board size and composition, but rather, reflects a dynamic process involving the particular and changing nature of the firm's competitive environment and managerial team.
Inside the family firm: the role of families in succession decisions and performance
, 2005
"... This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making, and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). The paper use ..."
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Cited by 117 (4 self)
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This paper uses a unique dataset from Denmark to investigate the impact of family characteristics in corporate decision making, and the consequences of these decisions on firm performance. We focus on the decision to appoint either a family or an external chief executive officer (CEO). The paper uses variation in CEO succession decisions that result from the gender of a departing CEO’s first-born child. This is a plausible instrumental variable (IV) as male firstchild firms are more likely to pass on control to a family CEO relative to female first-child firms, but the gender of a first child is unlikely to affect firms ’ outcomes. We find that family successions have a large negative causal impact on firm performance: operating profitability on assets falls by at least four percentage points around CEO transitions. Our IV estimates are significantly larger than those obtained using ordinary least squares. Furthermore, we show that family-CEO underperformance is particularly large for firms in high-growth industries and for relatively large firms. Overall, the empirical results demonstrate that professional non-family CEOs provide extremely valuable services to the organizations they head.
The role of boards of directors in corporate governance: a conceptual framework and survey
- Journal of Economic Literature
, 2010
"... This paper is a survey of the literature on boards of directors, with an emphasis on ..."
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Cited by 111 (4 self)
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This paper is a survey of the literature on boards of directors, with an emphasis on