 Board composition, CEO turnover and firm value: the effect of the Sarbanes-Oxley ActMustafa Dah () and Matthew Hurst International Journal of Financial Services Management, 2016, vol. 8, issue 3, 217-239 Abstract: This paper tests the effect of an exogenous shock, the Sarbanes-Oxley Act (SOX) of 2002, on the structure of corporate boards and their efficiency as a monitoring mechanism. The results suggest an increase in the participation of independent directors at the expense of insiders. Consequently, we investigate the implications of board composition changes on CEO turnover and firm value. We document a significant reduction in CEO turnover in the post-SOX period. We also demonstrate that, after SOX, a board dominated by independent directors is less likely to remove a CEO owing to poor performance. Finally, we highlight a negative association between the change in board composition and firm value. Contrary to the legislators' objectives, we suggest that the change in board structure brings about inefficient monitoring and promotes an unfavourable trade-off between independent directors and insiders. Keywords: board independence; managerial turnover; firm performance; Sarbanes-Oxley Act; board composition; CEO turnover; firm value; SOX; corporate boards; monitoring; independent directors; insiders. (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:ids:ijfsmg:v:8:y:2016:i:3:p:217-239 Access Statistics for this article More articles in International Journal of Financial Services Management from Inderscience Enterprises Ltd |
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