Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5069470 | Finance Research Letters | 2016 | 7 Pages |
Abstract
Prior research shows that powerful CEOs can exacerbate the agency conflict, resulting in adverse corporate outcomes. Exploiting an exogenous shock introduced by the passage of the Sarbanes-Oxley Act, we explore whether board independence mitigates CEO power. Based on difference-in-difference estimation, our evidence shows that independent directors view powerful CEOs unfavorably. Board independence diminishes CEO power by more than a quarter. Based on a quasi-natural experiment, our research design is less vulnerable to the omitted-variable bias and reverse causality and therefore suggests that the effect of board independence on CEO power is likely causal.
Related Topics
Social Sciences and Humanities
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Authors
Pornsit Jiraporn, Seksak Jumreornvong, Napatsorn Jiraporn, Simran Singh,