Bottom-Up Corporate Governance

David Thesmar, Augustin Landier and David Sraer

No 5500, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In many instances, 'independently-minded' top-ranking executives can impose strong discipline on their CEO, even though they are formally under his authority. This paper argues that the use of such a disciplining mechanism is a key feature of good corporate governance. We provide robust empirical evidence consistent with the fact that firms with high internal governance are more efficiently run. We empirically label as 'independent from the CEO' a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of independent executives exhibit (1) a lower level of profitability and (2) lower shareholder returns after large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder-friendly provisions.

Keywords: Corporate governance; Corporate performance; Acquisition; Executives (search for similar items in EconPapers)
JEL-codes: D23 G14 G34 (search for similar items in EconPapers)
Date: 2006-02
New Economics Papers: this item is included in nep-bec and nep-fin
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Bottom-Up Corporate Governance (2013)
Working Paper: Bottom-Up Corporate Governance (2012)
Working Paper: Bottom-Up Corporate Governance (2005)
Working Paper: Bottom-Up Corporate Governance (2005)
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