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| Author: | Faleye, O. Hoitash, R. Hoitash, U. |
| Title: | The costs of intense board monitoring |
| Journal: | Journal of Financial Economics
2011 : JUL, VOL 101:1 p. 160-181 |
| Index terms: | board of directors chief executive officers supervision committees earnings innovation value analysis |
| Language: | eng |
| Abstract: | This paper examines the effects of the intensity of board monitoring on directors' effectiveness in performing their monitoring and advising duties. It is found that monitoring quality increases when a majority of independent directors serve at least of the three principal monitoring committees. These companies exhibit greater sensitivity of CEO turnover to firm performance, lower excess executive compensation, and reduced earnings management. Companies with boards which monitor actively exhibit worse acquisition and decreased corporate innovation. Firm value results suggest that the negative advising effects outweigh the benefits of improved monitoring, especially when acquisitions or corporate innovation are remarkable value drivers or the firm's operations are complex. |
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