Review of Financial Studies, Forthcoming
71 Pages Posted: 14 Mar 2012 Last revised: 16 Feb 2016
Date Written: May 22, 2015
We use the 2003 NYSE and NASDAQ listing rules concerning board and committee independence as a quasi-natural experiment to examine the causal relations between board structure and CEO monitoring. Noncompliant firms forced to raise board independence or adopt a fully independent nominating committee significantly increase their forced CEO turnover sensitivity to performance relative to compliant firms. Nominating committee independence is important even when firms have an independent board, and the effect is stronger when the CEO was on the committee. We conclude that more independent boards and fully independent nominating committees lead to more rigorous CEO monitoring and discipline.
Keywords: CCEO turnover; Nominating committee independence; Board Independence; Board monitoring; Independent directors; Sarbanes-Oxley Act; Endogeneity
JEL Classification: G34, G38, J63, J41
Suggested Citation: Suggested Citation
Guo, Lixiong and Masulis, Ronald W., Board Structure and Monitoring: New Evidence from CEO Turnovers (May 22, 2015). Review of Financial Studies, Forthcoming; 7th Annual Conference on Empirical Legal Studies Paper; ECGI - Finance Working Paper No. 351/2013. Available at SSRN: https://ssrn.com/abstract=2021468 or http://dx.doi.org/10.2139/ssrn.2021468