Through close interactions with their CEO and CFO, independent directors as well as subordinate executives can assess the overconfidence of their CEO and CFO. We show that independent directors and subordinate executives trade on this assessment, albeit differently. Independent directors of a...

Over the past two decades, hedge fund activism has emerged as a new mechanism of corporate governance that brings about operational, financial and governance reforms to a corporation. Many prominent business executives and legal scholars are convinced that the entire American economy will suffer...

We examine whether the equity incentive heterogeneity of the executive team engenders a positive externality by curtailing stock price crash risk. Supporting this prediction, we find a negative relation between the equity incentive heterogeneity of the executive team and stock price crash risk....

This paper investigates the patterns of directors' trades and returns around takeover announcements. We find that the pre-announcement net value (the difference between buy value and sell value) of directors' trading is positively related to acquirers' announcement period abnormal returns. This...

Despite considerable reforms over the past two decades, boards – particularly at financial institutions – have been criticized recently for poor stewardship. This article argues that the lack of attention to behavioral and functional considerations – in particular, relating to director...

The board of directors performs the dual role of monitoring and advising the firm’s management. At times it makes certain key decisions itself. We study the optimal board composition (of monitoring and advisory “types”) within a cheap-talk framework where the CEO and the board each may...

How can office-seeking politicians or managers be aligned with social welfare or firm welfare, given that such agents have a suboptimal incentive to cater to majority preferences in situations with low participation costs and to elite preferences in situations with high participation costs? In...

This study investigates a communication game between a CEO and a board of directors where the CEO's career concerns can potentially impede value-increasing informative communication. By adopting a policy of aggressive boards (excessive replacement), shareholders can facilitate communication...

Using 196 Malaysian public listed firms, the study investigates the inter-relationship between executive compensation, earnings management and over investment. Although there is no evidence that executive directors enhance their compensation packages through earnings management, there is a...

We study dynamic incentive contracts in a continuous-time agency model with productivity switching between two unobserved states, about which an investor may learn by deviating from the myopically optimal action. The optimal contract balances short-run profits from myopic actions and the...