Bottom-Up Corporate Governance

Augustin Landier, Julien Sauvagnat, David Sraer () and David Thesmar
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Julien Sauvagnat: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique
David Sraer: Bendheim Center for Finance - Princeton University

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Abstract: This article empirically relates the internal organization of a firm with decision making quality and corporate performance. We call "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 following large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder friendly provisions. One interpretation is that "independently minded" top ranking executives act as a counter-power imposing strong discipline on their CEO, even though they are formally under his authority.

Keywords: corporate; governance (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (18)

Published in Review of Finance, 2012, 17 (1), pp.161-201. ⟨10.1093/rof/rfs020⟩

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Related works:
Journal Article: Bottom-Up Corporate Governance (2013)
Working Paper: Bottom-Up Corporate Governance (2006)
Working Paper: Bottom-Up Corporate Governance (2005)
Working Paper: Bottom-Up Corporate Governance (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01026127

DOI: 10.1093/rof/rfs020

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