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Transaction cost economics and corporate governance: the case of CEO age and financial stake
Author(s) -
McClelland Patrick L.,
O'Brien Jonathan P.
Publication year - 2011
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.1520
Subject(s) - corporate governance , transaction cost , agency cost , principal–agent problem , agency (philosophy) , accounting , database transaction , business , economics , stock (firearms) , positive economics , finance , sociology , shareholder , mechanical engineering , social science , computer science , engineering , programming language
Agency theory provides a valuable lens for understanding the role and importance of many varied governance mechanisms. We argue that transaction cost economics (TCE) provides a complementary theoretical lens for studying corporate governance because it illuminates the various contingencies that moderate the importance of alternative governance mechanisms. Using agency theory, we argue and find evidence that the confluence of advancing CEO age and large CEO stock holdings will cause the CEO to become overly risk‐averse. Moreover, we use TCE to more fully explicate the ensuing performance consequences as well as the contextual factors that critically moderate this relationship. Copyright © 2010 John Wiley & Sons, Ltd.