Are Superstar Directors Effective in Corporate Governance?

57 Pages Posted: 29 Oct 2020

See all articles by Silu Cheng

Silu Cheng

Metropolitan State University of Denver

Lindsay Baran

Kent State University

Date Written: February 17, 2020

Abstract

In this paper, I hand-collected a sample of prestigious business award-winner directors based on the four types of awards discussed by Chen, Wu, and Zhivotova (2017) and use them to represent reputable board of directors. I examine how awardee directors would influence management monitoring effectiveness and corporate governance by testing with CEO compensation level, pay-performance sensitivity, risk-taking behavior, accounting conservatism, and turnover-performance sensitivity. The results show that with award-winner directors sitting in the boards, CEOs receive more incentive compensation, have higher risk-taking incentives, and the firm adopts higher level of accounting conservatism. The findings suggest that reputable directors are effective in performing monitoring and advising duties.

Keywords: Board of directors, CEO, Compensation, Incentives

JEL Classification: G34, M12

Suggested Citation

Cheng, Silu and Baran, Lindsay, Are Superstar Directors Effective in Corporate Governance? (February 17, 2020). Available at SSRN: https://ssrn.com/abstract=3539759 or http://dx.doi.org/10.2139/ssrn.3539759

Silu Cheng (Contact Author)

Metropolitan State University of Denver ( email )

Student Success Building
890 Auraria Pkwy #310
Denver, CO 80217
United States

Lindsay Baran

Kent State University ( email )

College of Business Administration
P.O. Box 5190
Kent, OH 44242-0001
United States

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