Blockholders on Boards and CEO Compensation, Turnover and Firm Valuation
Quarterly Journal of Finance, 2019 Forthcoming
69 Pages Posted: 7 Aug 2009 Last revised: 26 Mar 2019
Date Written: March 2019
We find that the presence of independent directors who are blockholders (IDBs) in firms promotes better CEO contracting and monitoring, and higher firm valuation. Using a panel of about 11,500 firm-years with a unique, hand-collected dataset on IDB-identity and a novel instrument, we find that firms with IDBs have lower excess CEO pay, lower flow and stock of CEO equity incentives, and higher valuations. These effects are substantial and robust. Our findings imply that by making it easier for blockholders to obtain a board seat, proxy access rules or bylaws can benefit shareholders.
Keywords: Boards of Directors, Blockholders, Executive Compensation, CEO Turnover, Firm Valuation
JEL Classification: G32, G34, J33, M52
Suggested Citation: Suggested Citation