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- Title
Do Board Structure and CEO Selection Sources Affect the Effectiveness of Board Monitoring?
- Authors
Yuwei Wang; Jianping Qi
- Abstract
It is widely believed that outsider boards are better monitors of management because of their independence. In this paper, we re-examine this notion by looking into the sensitivity of CEO turnover to firm performance when firms are overseen by outsider boards relative to when they are controlled by insider boards. Holding constant CEO selection sources (internal promotion vs. external hire), we find that CEO turnover is not more sensitive to performance for firms with outsider boards. This result suggests that outsider boards are not necessarily the more active or stronger monitors of CEOs. We also find that whether CEOs are hired from outside or are promoted from within the firms has little impact on the likelihood of their termination by either insider or outsider boards.
- Subjects
SELECTION &; appointment of chief executive officers; MONITORING of directors of corporations; DISMISSAL of executives; EMPLOYEE promotions; EXECUTIVE recruiting
- Publication
Banking & Finance Review, 2016, Vol 8, Issue 1, p69
- ISSN
1947-7945
- Publication type
Article