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Article: The Value of Board Commitment

TitleThe Value of Board Commitment
Authors
KeywordsCorporate governance
Board of Directors
Strategic communication
Issue Date2021
PublisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653
Citation
Review of Accounting Studies, 2021, Epub 2021-05-01 How to Cite?
AbstractBoards can learn about the environment of their firms through information gathering and communicating with the CEO. In the post-Sarbanes-Oxley environment, some boards have taken steps to shape the communication more proactively by committing to decision rules, such as spending limits, before eliciting a report from the CEO. All else equal, such commitment power on the part of the board improves its communication with the CEO. However, taking into consideration the endogeneity of board composition/bias, we show that the board’s commitment power may in fact impede such communication, in equilibrium, by prompting the shareholders to appoint a more antagonistic board. We identify other cases where, in equilibrium, the board’s commitment power does foster communication, but ultimately reduces shareholder value, because the improved information flow dampens the board’s effort incentives. We discuss applications of our model to board staggering.
Persistent Identifierhttp://hdl.handle.net/10722/299706
ISSN
2020 Impact Factor: 3.419
2015 SCImago Journal Rankings: 2.039

 

DC FieldValueLanguage
dc.contributor.authorBaldenius, T-
dc.contributor.authorMeng, X-
dc.contributor.authorQiu, L-
dc.date.accessioned2021-05-26T03:27:55Z-
dc.date.available2021-05-26T03:27:55Z-
dc.date.issued2021-
dc.identifier.citationReview of Accounting Studies, 2021, Epub 2021-05-01-
dc.identifier.issn1380-6653-
dc.identifier.urihttp://hdl.handle.net/10722/299706-
dc.description.abstractBoards can learn about the environment of their firms through information gathering and communicating with the CEO. In the post-Sarbanes-Oxley environment, some boards have taken steps to shape the communication more proactively by committing to decision rules, such as spending limits, before eliciting a report from the CEO. All else equal, such commitment power on the part of the board improves its communication with the CEO. However, taking into consideration the endogeneity of board composition/bias, we show that the board’s commitment power may in fact impede such communication, in equilibrium, by prompting the shareholders to appoint a more antagonistic board. We identify other cases where, in equilibrium, the board’s commitment power does foster communication, but ultimately reduces shareholder value, because the improved information flow dampens the board’s effort incentives. We discuss applications of our model to board staggering.-
dc.languageeng-
dc.publisherSpringer New York LLC. The Journal's web site is located at http://springerlink.metapress.com/openurl.asp?genre=journal&issn=1380-6653-
dc.relation.ispartofReview of Accounting Studies-
dc.rightsThis is a post-peer-review, pre-copyedit version of an article published in [insert journal title]. The final authenticated version is available online at: https://doi.org/[insert DOI]-
dc.subjectCorporate governance-
dc.subjectBoard of Directors-
dc.subjectStrategic communication-
dc.titleThe Value of Board Commitment-
dc.typeArticle-
dc.identifier.emailQiu, L: lqiu@hku.hk-
dc.identifier.authorityQiu, L=rp02591-
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1007/s11142-021-09586-9-
dc.identifier.scopuseid_2-s2.0-85105387964-
dc.identifier.hkuros322524-
dc.identifier.volumeEpub 2021-05-01-
dc.publisher.placeUnited States-

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