Does the Decision to Retain Retiring Executives on the Board of Directors Help to Control Agency Problems in American and Japanese Firms?

James A. Brickley, Jeffrey Coles and James S. Linck

Chapter 9 in Banking, Capital Markets and Corporate Governance, 2001, pp 233-249 from Palgrave Macmillan

Abstract: Abstract Prospects for promotion provide incentives to lower-level managers in America and Japan. Promotion incentives, however, do not exist for top managers who are at the apex of their firms’ hierarchies. One little explored mechanism that might provide promotion-like incentives to top managers is the prospect of being retained on the board of directors after retirement (e.g., as chairman of the board). Incentives only exist if the retention decision is based on the top manager’s performance during active employment. This paper summarises past and present research on the board retention/performance relation for retiring managers of Japanese and American firms. The evidence suggests a positive and statistically significant relation between retention and performance for retiring managers in both countries. This study extends the existing research by providing new evidence on the importance of relativeperformance evaluation in the retention decision for US firms. We find that absolute performance is more important than performance relative to the market or industry in explaining the retention decision.

Keywords: Corporate Governance; Stock Return; Agency Problem; Common Shock; Relative Performance Evaluation (search for similar items in EconPapers)
Date: 2001
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

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:pal:palchp:978-0-230-28814-0_9

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230288140

DOI: 10.1057/9780230288140_9

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().