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A Theory of Board Control and Size

A Theory of Board Control and Size This article presents a model of optimal control of corporate boards of directors. We determine when one would expect inside versus outside directors to control the board, when the controlling party will delegate decision-making to the other party, the extent of communication between the parties, and the number of outside directors. We show that shareholders can sometimes be better off with an insider-controlled board. We derive endogenous relationships among profits, board control, and the number of outside directors that call into question the usual interpretation of some documented empirical regularities. (JEL G34) http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Review of Financial Studies Oxford University Press

A Theory of Board Control and Size

The Review of Financial Studies , Volume 21 (4) – Jul 20, 2008

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References (45)

Publisher
Oxford University Press
Copyright
© Published by Oxford University Press.
Subject
Articles
ISSN
0893-9454
eISSN
1465-7368
DOI
10.1093/rfs/hhl030
Publisher site
See Article on Publisher Site

Abstract

This article presents a model of optimal control of corporate boards of directors. We determine when one would expect inside versus outside directors to control the board, when the controlling party will delegate decision-making to the other party, the extent of communication between the parties, and the number of outside directors. We show that shareholders can sometimes be better off with an insider-controlled board. We derive endogenous relationships among profits, board control, and the number of outside directors that call into question the usual interpretation of some documented empirical regularities. (JEL G34)

Journal

The Review of Financial StudiesOxford University Press

Published: Jul 20, 2008

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