TITLE

A Theory of Board Control and Size

AUTHOR(S)
Harris, Milton; Raviv, Artur
PUB. DATE
July 2008
SOURCE
Review of Financial Studies;Jul2008, Vol. 21 Issue 4, p1797
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
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.
ACCESSION #
34310775

 

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