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Bottom-Up Corporate Governance

Abstract : This article empirically relates the internal organization of a firm with decision making quality and corporate performance. We call "independent from the CEO" a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of independent executives exhibit (1) a lower level of profitability and (2) lower shareholder returns following large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder friendly provisions. One interpretation is that "independently minded" top ranking executives act as a counter-power imposing strong discipline on their CEO, even though they are formally under his authority.
Keywords : corporate governance
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https://hal-hec.archives-ouvertes.fr/hal-01026127
Contributor : Antoine Haldemann <>
Submitted on : Saturday, July 19, 2014 - 10:00:12 PM
Last modification on : Wednesday, August 5, 2020 - 3:14:51 AM

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Augustin Landier, Julien Sauvagnat, David Sraer, David Thesmar. Bottom-Up Corporate Governance. Review of Finance, Oxford University Press (OUP): Policy F - Oxford Open Option D, 2012, 17 (1), pp.161-201. ⟨10.1093/rof/rfs020⟩. ⟨hal-01026127⟩

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