Bottom-Up Corporate Governance | Zendy

Augustin Landier | Zendy; Julien Sauvagnat | Zendy; David Sraer | Zendy; David Thesmar | Zendy

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Bottom-Up Corporate Governance

Author(s) -

Augustin Landier,

Julien Sauvagnat,

David Sraer,

David Thesmar

Publication year - 2012

Publication title -

european finance review

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 4.933

H-Index - 61

eISSN - 1573-692X

pISSN - 1382-6662

DOI - 10.1093/rof/rfs020

Subject(s) - corporate governance , shareholder , accounting , business , profitability index , independence (probability theory) , control (management) , quality (philosophy) , power (physics) , economics , management , finance , philosophy , statistics , physics , mathematics , epistemology , quantum mechanics

International audienceThis 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

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