 CEO-board dynamicsJohn R. Graham, Hyunseob Kim and Mark Leary Journal of Financial Economics, 2020, vol. 137, issue 3, 612-636 Abstract: We examine CEO-board dynamics using a new panel dataset that spans 1920 to 2011. The long sample allows us to perform within-firm and within-CEO tests over a long horizon, many for the first time in the governance literature. Consistent with theories of bargaining or dynamic contracting, we find board independence increases at CEO turnover and falls with CEO tenure, with the decline stronger following superior performance. CEOs are also more likely to be appointed board chair as tenure increases, and we find evidence consistent with a substitution between board independence and chair duality. Other results suggest that these classes of models fail to capture important elements of board dynamics. First, the magnitude of the CEO tenure effect is economically small, much smaller, for example, than the strong persistence in board structure that we show. Second, when external CEOs are hired, board independence falls and subsequently increases. Third, event studies show a positive market reaction when powerful CEOs die in office, consistent with powerful CEOs becoming entrenched. Keywords: Governance; Chief executive; Board of directors; Dynamic contracting; Bargaining; Compensation; Monitoring (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:137:y:2020:i:3:p:612-636 DOI: 10.1016/j.jfineco.2020.04.007 Access Statistics for this article Journal of Financial Economics is currently edited by G. William Schwert More articles in Journal of Financial Economics from Elsevier |
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