An Empirical Investigation of Internal Governance
Rajesh K. Aggarwal
University of Minnesota - Twin Cities - Carlson School of Management
Texas Christian University
University of Utah - Department of Finance
May 6, 2013
AFA 2011 Denver Meetings Paper
Acharya, Myers, and Rajan (2011) theorize that CEO rent extraction is constrained by subordinate managers. This internal governance works best when the relative contributions of CEOs and managers to output are balanced. Consistent with the theory, we nd a hump-shaped relation between relative contributions and corporate investment, and between relative contributions and firm performance. These hump-shaped relations are stronger for firms with large age gaps between the CEO and the manager, with non-founder CEOs, with higher human capital intensity, and which promote from within. Other forms of governance do not diminish the importance of internal governance, and the results are robust to endogeneity concerns.
Number of Pages in PDF File: 55working papers series
Date posted: March 18, 2010 ; Last revised: May 7, 2013
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