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Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation

Anup Agrawal and Tareque Nasser ()
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Anup Agrawal: Culverhouse College of Business, University of Alabama, Tuscaloosa, 35487-0224, AL, USA
Tareque Nasser: 2097 BB, 1301 Lovers Lane, College of Business Administration, Kansas State University, Manhattan, 66506, KS, USA

Quarterly Journal of Finance (QJF), 2019, vol. 09, issue 03, 1-67

Abstract: We find that the presence of independent directors who are blockholders (IDBs) in firms promotes better CEO contracting and monitoring, and higher firm valuation. Using a panel of about 11,500 firm-years with a unique, hand-collected dataset on IDB-identity and a novel instrument, we find that firms with IDBs have lower excess CEO pay, lower flow and stock of CEO equity incentives, and higher valuations. These effects are substantial and robust. Our findings imply that by making it easier for blockholders to obtain a board seat, proxy access rules or bylaws can benefit shareholders.

Keywords: Boards of directors; blockholders; executive compensation; CEO turnover; firm valuation (search for similar items in EconPapers)
Date: 2019
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DOI: 10.1142/S2010139219500101

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