The Powers that Be: Concentration of Authority Within the Board of Directors and Variability in Firm Performance

52 Pages Posted: 19 Jan 2019 Last revised: 29 Oct 2019

See all articles by Hai Tran

Hai Tran

Loyola Marymount University - Department of Finance

Jason Turkiela

University of Oklahoma; University of Minnesota - Duluth - Labovitz School of Business and Economics (LSBE)

Date Written: September 18, 2019

Abstract

In this study, we examine how the concentration of authority within the board of directors affects the variability of firm performance. Using directors' committee assignments as a proxy for decision-making power, we develop two unique measures of board concentration of authority. We find that firms with greater concentration of power within their boards have higher variability in firm performance. In additional tests, we demonstrate that our results are not driven by endogeneity bias. Finally, we also show concentrated boards adopt more extreme corporate strategies, providing several different mechanisms through which board concentration of power affects firm performance volatility.

Keywords: Authority, Board of Directors, Corporate Governance, Decision-making Power, Delegation, Firm Performance, Variability

JEL Classification: G30, G34, L14

Suggested Citation

Tran, Hai and Turkiela, Jason and Turkiela, Jason, The Powers that Be: Concentration of Authority Within the Board of Directors and Variability in Firm Performance (September 18, 2019). Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3318660 or http://dx.doi.org/10.2139/ssrn.3318660

Hai Tran (Contact Author)

Loyola Marymount University - Department of Finance ( email )

Los Angeles, CA 90045
United States

Jason Turkiela

University of Minnesota - Duluth - Labovitz School of Business and Economics (LSBE) ( email )

412 Library Drive
Duluth, MN 55812-2496
United States

University of Oklahoma ( email )

Norman, OK 73019
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
108
Abstract Views
1,529
rank
340,416
PlumX Metrics