Information control, career concerns, and corporate governance

Fenghua Song, Anjan V. Thakor

Research output: Contribution to journalArticle

62 Scopus citations

Abstract

We examine corporate governance effectiveness when the CEO generates project ideas and the board of directors screens these ideas for approval. However, the precision of the board's screening information is controlled by the CEO. Moreover, both the CEO and the board have career concerns that interact. The board's career concerns cause it to distort its investment recommendation procyclically, whereas the CEO's career concerns cause her to sometimes reduce the precision of the board's information. Moreover, the CEO sometimes prefers a less able board, and this happens only during economic upturns, suggesting that corporate governance will be weaker during economic upturns.

Original languageEnglish (US)
Pages (from-to)1845-1896
Number of pages52
JournalJournal of Finance
Volume61
Issue number4
DOIs
StatePublished - Aug 1 2006

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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