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Boards, CEOs, and surviving a financial crisis: Evidence from the internet shakeout
Author(s) -
Dowell Glen W. S.,
Shackell Margaret B.,
Stuart Nathan V.
Publication year - 2011
Publication title -
strategic management journal
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 11.035
H-Index - 286
eISSN - 1097-0266
pISSN - 0143-2095
DOI - 10.1002/smj.923
Subject(s) - corporate governance , context (archaeology) , financial distress , business , financial crisis , the internet , power (physics) , accounting , financial system , finance , economics , paleontology , physics , macroeconomics , quantum mechanics , world wide web , computer science , biology
We examine whether corporate governance matters more for firms facing financial distress. We theorize that financial crisis changes the relative costs and benefits of governance mechanisms and that more independent and smaller boards become more valuable in distressed firms. We further hypothesize that CEO power becomes increasingly beneficial as concentrated power allows the firm to respond more rapidly to the crisis. Event‐history analysis of the failure of publicly traded Internet firms over the period 2000–2002 confirms our hypotheses. Our results suggest that the association between governance and survival depends on firm and environmental context and that one‐size‐fits‐all prescriptions for governance mechanisms are therefore likely to be ineffective. Copyright © 2011 John Wiley & Sons, Ltd.