The costs of intense board monitoring

• 成果类型: Article
• 署名作者: Faleye, Olubunmi; Hoitash, Rani; Hoitash, Udi
• 署名单位: Northeastern University; Bentley University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2011.02.010
• 发表日期: 2011
• 页码: 160-181
• 关键词: Intense monitoring; Board committees; Strategic advising; Firm value

摘要

We study the effects of the intensity of board monitoring on directors' effectiveness in performing their monitoring and advising duties. We find that monitoring quality improves when a majority of independent directors serve on at least two of the three principal monitoring committees. These firms exhibit greater sensitivity of CEO turnover to firm performance, lower excess executive compensation, and reduced earnings management. The improvement in monitoring quality comes at the significant cost of weaker strategic advising and greater managerial myopia. Firms with boards that monitor intensely exhibit worse acquisition performance and diminished corporate innovation. Firm value results suggest that the negative advising effects outweigh the benefits of improved monitoring, especially when acquisitions or corporate innovation are significant value drivers or the firm's operations are complex. (C) 2011 Elsevier B.V. All rights reserved.