An analysis of the effect of management participation in director selection on the long-term performance of the firm

Callahan, William T; Millar, James A.; Schulman, Craig T.

doi:10.1016/s0929-1199(02)00004-4

Cited by 76 publications

(52 citation statements)

References 23 publications

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“…For instance, Callahan, Millar, and Schulman (2003) find that firm performance is positively associated with the involvement of management in the selection of board members, but is negatively associated with the CEO also being the Chairman of the Board of Directors. We find that if the CEO is Chair, directors receive larger total compensation.…”

Section: A Director Compensationmentioning

confidence: 99%

CEO compensation, director compensation, and firm performance: Evidence of cronyism?

Brick

Palmon

Wald

2006

Journal of Corporate Finance

633

434

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We model CEO and director compensation using firm characteristics, CEO characteristics, and governance variables. After controlling for monitoring proxies, we find a significant positive relationship between CEO and director compensation. We hypothesize that this relationship could be due to unobserved firm complexity (omitted variables), and/or to excess compensation of directors and managers. We also find evidence that excess compensation (both director and CEO) is associated with firm underperformance. We therefore conclude that the evidence is consistent with excessive compensation due to mutual back scratching or cronyism. The evidence suggests that excessive compensation has an effect on firm performance that is independent of the poor governance variables discussed by previous studies.JEL Classification: G30, G34

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Section: A Director Compensationmentioning

confidence: 99%

CEO compensation, director compensation, and firm performance: Evidence of cronyism?

Brick

Palmon

Wald

2006

Journal of Corporate Finance

633

434

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“…But, the attainment of this knowledge requires both time and firm-specific expertise on the part of the directors, two things that inside directors have but outside directors lack.'' Callahana et al [26] then point out that inside directors, due to their firm-specialized knowledge, have a comparative advantage over independent directors. Furthermore, Akhigbe and Martin [11] prove by factor analysis that board independence is negatively related to bank risk-taking.…”

Section: Board Compositionmentioning

confidence: 99%

The Impact of Web-Based Disclosure on the Capital Market Risk

L¹

2016

International JAR

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This paper evaluates the Web-based voluntary disclosure practices in a sample of 180 French listed firms. The main objective is to investigate the impact of Internet-based disclosure on capital market risk. Three measures are used to present the capital market risk: total risk is measured by the standard deviation of stock returns, and systematic risk and idiosyncratic risk are the beta and standard deviation of the residuals generated from the market model, respectively. Following the method of Gajewski and Li, the Web-based disclosure is measured by an index of 40 items. The empirical results show that total risk and idiosyncratic risk vary inversely with the strength of Internet disclosure. This indicates that improved online disclosure can reduce investors' uncertainty in the capital market. However, systematic risk is not influenced by the disclosure practice. Furthermore, capital concentration and board size are negatively associated with total and idiosyncratic risk. This study extends the prior research by investigating the influence of online disclosure on capital risk in the French stock market. I am particularly concerned about the technical features of Internet disclosure and its impact on capital risk. Online information is generally considered to be user-friendly, yet it is now necessary to analyze the effect of this convenience provided by Internet technology on the capital market.

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“…Thus, while some researchers argue, and find empirically, that ownership structure is related to firm performance (Morck et al, 1988;McConnell and Servaes, 1990;Hermalin and Weisbach, 1991;Gugler and Yortoglu, 2003), others disagree and contend that controlling for an alleged endogenous relationship between the two variables there is no such effect, and also find empirical support for their position (Demsetz an Lehn, 1985;Himmelberg et al, 1999;Demsetz and Villalonga, 2001;Coles et al, 2012). On the other hand, while some researchers find that the size or composition of the board of directors is related to firm performance (Baysinger and Butler, 1985;Rosenstein and Wyatt, 1990;Yermack, 1996;Callahan et al 2003;Duchin et al 2010), others do not find such relationships (Fosberg, 1989;Hermalin and Weisbach, 1991;Bhagat and Black, 2002). Moreover, in this last literature there is an important debate concerning the direction of causality.…”

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confidence: 99%

Why has the literature on corporate governance and firm performance yielded mixed results?

Saravia¹

2015

COC

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This paper reviews the empirical literature on corporate governance and firm performance and finds that it has yielded mixed results. The paper argues that a primary reason for this situation is that the relevant theories have not been applied to the class of phenomena they were designed to explain. In particular, the literature that focuses on ownership structure and firm performance employs entrepreneurial agency theories of the firm but applies them to managerial firms where ownership is separated from control. This is evidenced by the fact that firms in which managerial ownership is close to zero percent are included in the samples. Conversely, empirical work centered on the relationship between board composition and firm performance (which relies on managerial agency theories of the firm) not only does not make sure that the firms in their samples are characterized by the separation of ownership and control, but it also ignores the alternative managerial agency theory concerning the agency costs of free cash flows. Additionally, the paper maintains that other approaches, such as that which studies the relationship between indices of antitakeover provisions and firm performance, do not rely on any particular theory and for this reason are beset by problems of interpretation. The paper concludes with recommendations for avoiding the drawbacks and achieving future progress.

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An analysis of the effect of management participation in director selection on the long-term performance of the firm

Cited by 76 publications

References 23 publications

CEO compensation, director compensation, and firm performance: Evidence of cronyism?

CEO compensation, director compensation, and firm performance: Evidence of cronyism?

The Impact of Web-Based Disclosure on the Capital Market Risk

Why has the literature on corporate governance and firm performance yielded mixed results?

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