Governance and Boards of Directors in Closed-End Investment Companies

45 Pages Posted: 24 Jul 2000

See all articles by Larry Dann

Larry Dann

University of Oregon - Department of Finance

Diane Del Guercio

University of Oregon, Lundquist College of Business; European Corporate Governance Institute (ECGI)

M. Megan Partch

University of Oregon - Department of Finance

Date Written: May 2002

Abstract

Boards of directors occupy a prominent position in the governance of corporations, and have been a focal point of SEC efforts to ensure that investment companies are serving the interests of individual investors. We analyze whether board structure and director independence in closed-end investment companies are related to shareholder interests in ways that are consistent with boards being effective monitors. We report that funds with relatively low expense ratios, one measure of board effectiveness, have smaller boards, a higher proportion of the board that is legally considered independent, relatively low director compensation, and charter provisions that specify remedial action if discounts become large. Evidence from our analysis of major fund decisions regarding restructuring, including share repurchases, open-ending proposals and rights offerings, is largely consistent with the expense ratio analysis. Overall, board characteristics that we identify with effective board independence are associated with lower expense ratios and value-enhancing restructurings.

JEL Classification: G23, G32, G34

Suggested Citation

Dann, Larry Y. and Del Guercio, Diane and Partch, M. Megan, Governance and Boards of Directors in Closed-End Investment Companies (May 2002). EFA 2002 Berlin Meetings Presented Paper; Presented at Tuck-JFE Contemporary Corporate Governance Conference. Available at SSRN: https://ssrn.com/abstract=236105 or http://dx.doi.org/10.2139/ssrn.236105

Larry Y. Dann (Contact Author)

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
(541) 346-3330 (Phone)

Diane Del Guercio

University of Oregon, Lundquist College of Business ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States
541-346-5179 (Phone)
541-346-3341 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

M. Megan Partch

University of Oregon - Department of Finance ( email )

Lundquist College of Business
1208 University of Oregon
Eugene, OR 97403
United States

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