Board Incentives and Board Independence in Dynamic Agency

Svetlana Katolnik, Sandra K. Kukec and Jens Robert Schöndube

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: Efficiency of the board structure is usually perceived as linked to a higher degree of monitoring. If monitoring improves performance measurement signals, on which a manager is compensated, it can be considered desirable from the manager's point of view. As a result, having a low degree of board independence (many insiders on the board) may incentivize the board to improve its monitoring technology. However, from a dynamic perspective board monitoring is not always desirable, since it can destroy the ex ante efficient trade-off between risk and incentives under the presence of renegotiation possibility. This provides predictions for an optimal board composition seen from a dynamic perspective.

Keywords: Corporate governance; Board composition; Inside directors; Board incentives (search for similar items in EconPapers)
JEL-codes: D81 G34 M41 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2015-12
New Economics Papers: this item is included in nep-cta, nep-hrm and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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