Shareholder Empowerment and Board of Directors Effectiveness*

• 成果类型: Article
• 署名作者: Drymiotes, George; Lin, Haijin; Ertimur, Yonca
• 署名单位: Texas Christian University; University of Houston System; University of Houston; University of Colorado System; University of Colorado Boulder
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12581
• 发表日期: 2020
• 页码: 2649-2695
• 关键词: CORPORATE GOVERNANCE; access; CONSEQUENCES; reputation; Activism; MARKET; pay

摘要

We develop a model to examine implications of empowering shareholders to replace directors. We find that shareholder empowerment functions as a double-edged sword. On the one hand, it can weaken ineffective boards' incentive to hold on to their position. On the other hand, it can induce both effective and ineffective boards to behave strategically to avoid a potential dismissal. As a result, empowerment does not necessarily increase firm value; in some cases, empowerment exacerbates the agency problem it is intended to address. Giving shareholders the power to set board compensation (have a say on pay) can mitigate these problems. However, even when empowerment benefits (harms) the shareholders, firm value may decrease (increase). Finally, we discuss empirical and policy implications of the main findings.