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.

Bottom-up corporate governance

SAUVAGNAT, JULIEN;
2013

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.
2013
2013
Landier, Augustin; Sauvagnat, Julien; Sraer, David; Thesmar, David
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/11565/3986448
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