Determinants and Accounting Consequences of Forming a Governance Committee: Evidence from the United States
18 Pages Posted: 17 Nov 2009
Abstract
This study examines a sample of S&P 1,500 firms over the period of 1996 to 2002. It finds that firms with a larger, more independent, and more active board, higher agency costs (as indicated by lower managerial ownership and lower takeover vulnerability), and past occurrence of class-action lawsuits are more likely to voluntarily form a governance committee. This study also provides evidence that having a governance committee brings real consequences in that it constrains managerial opportunism by reducing aggressive financial reporting.
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