  |
|
|
||||
|
||||
It Pays to Have Friends
Byoung-Hyoun Hwang Krannert School of Management - Purdue University Seoyoung Kim Krannert School of Management - Purdue University Journal of Financial Economics (JFE), Forthcoming Abstract: Currently, a director is classified as independent if he/she has neither financial nor familial ties to the CEO or to the firm. We add another dimension: social ties. Using a unique data set, we find that 87% of boards are conventionally independent, but that only 62% are conventionally and socially independent. Furthermore, firms whose boards are conventionally and socially independent award a significantly lower level of compensation, exhibit stronger pay performance sensitivity, and exhibit stronger turnover-performance sensitivity than firms whose boards are only conventionally independent. Our results suggest that social ties do matter, and that consequently, a considerable percentage of the conventionally independent boards are substantively not.
Keywords: Board Independence, Social Ties, Executive Compensation JEL Classifications: G3, G34, G39 Accepted Paper SeriesDate posted: August 03, 2008 ; Last revised: March 10, 2009Suggested CitationContact Information
|
|
||||||||||||||||||||||||
© 2009 Social Science Electronic Publishing, Inc. All Rights Reserved. Terms of Use Privacy Policy
This page was served by apollo4 in 0.187 seconds.
Download
Facebook
Twitter
Digg
Del.icio.us
CiteULike
