Bottom-Up Corporate Governance

Augustin Landier, David Sraer () and David Thesmar
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David Sraer: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique

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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: acquisition; corporate governance; corporate performance; executives (search for similar items in EconPapers)
Date: 2005-10-20
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Citations: View citations in EconPapers (4)

Published in 2005

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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 (2006)
Working Paper: Bottom-Up Corporate Governance (2005)
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