The Market for Corporate Directors
This paper develops a matching model in the market for directors to explain equilibrium board quality. In my model, (1) the boards of directors have the role of monitoring and advising, (2) the impact of a CEOs quality increases with the size of a firm under his control, (3) the CEO and the boards could be either complements or substitutes, and (4) the boards enjoy money value or reputation value or both. When the reputation depends on the market value of firms, potential directors like to work at firms with talented CEOs if they can enjoy enough reputational gain on boards owing to talented CEOs. In contrast, when potential directors want value- added for reputation, they would be at firms with low-ability CEOs if the CEO and the boards are substitutes. Also, this model suggests the possibility that the quality of directors on the same boards could be dispersed, which is consistent with the empirical findings. My empirical estimates suggest that talented ongoing CEOs and former CEOs work as outside directors of firms with high market capitalization, though neither with high assets nor sales. The quality of boards is higher where the CEO pay is higher, but whether they like to work at firms with talented CEOs or not is ambiguous due to the endogeneity. The firms with talented boards would be likely to pay more to CEO. I also find that the firms with high sales pay more to outside directors. A 1％ increase in sales makes board compensation increase by 0.66％. Finally, board pay is 0.13％ higher where CEO pay is 1％ higher. We can infer that the CEO and the boards are complements.
Corporate Governance Boards of Directors Board Quality CEO Compensation Board Compensation Professional LaborMarket Job Search Matching Production and Organization
Changmin Lee
Indiana University - Bloomington Department of Economics, Wylie Hall, Indiana University,47405, IN
国际会议
广州
英文
1-40
2009-07-07（万方平台首次上网日期，不代表论文的发表时间）