Board Expertise and Executive Incentives

• 成果类型: Article
• 署名作者: Meng, Xiaojing; Tian, Jie Joyce
• 署名单位: New York University; University of Waterloo
• 刊物名称: MANAGEMENT SCIENCE
• ISSN/ISSBN: 0025-1909
• DOI: 10.1287/mnsc.2019.3355
• 发表日期: 2020
• 页码: 5448-5464
• 关键词: board expertise; ceo incentives; corporate governance; Firm value; INVESTMENT

摘要

We investigate how board expertise affects chief executive officer (CEO) incentives and firm value. The CEO engages in a sequence of tasks: first acquiring information to evaluate a potential project, then reporting his or her assessment of the project to the board, and finally implementing the project if it is adopted. We demonstrate that the CEO receives higher compensation when the board agrees with the CEO on the assessment of the project. Board expertise leads to (weakly) better investment decisions and helps motivate the CEO's evaluation effort; however, it may induce underreporting and reduce the CEO's incentives to properly implement the project. Consequently, if motivating the CEO to evaluate projects is the major concern (e.g., innovative industries), board expertise exhibits an overall positive effect on firmvalue; however, ifmotivating the CEOto implement projects is the major concern (e.g., mature industries), board expertise can harm firm value.