Authority, Consensus, and Governance

Archishman Chakraborty and Bilge Yılmaz

The Review of Financial Studies, 2017, vol. 30, issue 12, 4267-4316

Abstract: Management-aligned boards exchange precise information with management and make efficient decisions. But when agency conflicts are important, management-aligned boards may not maximize shareholder value. Even if management controls all decisions and the board only provides advice, optimal boards may withhold information. This creates inefficiencies. But agency costs fall because management is induced to obey the board. When the board can directly veto management proposals, shareholders are better off. Optimal boards should then be more shareholder-aligned. Shareholder value is further enhanced if shareholders can veto management and also commit to revealing the board’s information. Optimal boards should then be perfectly shareholder-aligned. Received September 26, 2015; editorial decision December 18, 2016 by Editor Andrew Karolyi.

Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://hdl.handle.net/10.1093/rfs/hhx068 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:oup:rfinst:v:30:y:2017:i:12:p:4267-4316.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Review of Financial Studies is currently edited by Itay Goldstein

More articles in The Review of Financial Studies from Society for Financial Studies Oxford University Press, Journals Department, 2001 Evans Road, Cary, NC 27513 USA.. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().