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Takeover Markets and Corporate Board Composition: Some further evidence
Author(s) -
Arthur Neal,
Taylor Stephen
Publication year - 1995
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.1995.tb00119.x
Subject(s) - corporate governance , market for corporate control , accounting , business , legislation , composition (language) , control (management) , outcome (game theory) , corporate law , substitution (logic) , stakeholder , economics , shareholder , finance , microeconomics , political science , management , law , linguistics , philosophy , programming language , computer science
There is evidence that corporate boards monitor and discipline managerial behaviour, a view also taken of an active market for corporate control. We investigate the extent to which board composition reflects restrictions on corporate control transactions, an outcome consistent with substitution between corporate governance mechanisms. In contrast to prior research, our results show that corporate boards are larger, and comprise a relatively higher proportion of outside directors when the firm is incorporated in a state with relatively restrictive takeover legislation. We interpret these findings as indicative of potential substitution among corporate governance mechanisms, an outcome often overlooked by advocates of “compulsory” board structures.