The Bright Side of Co-Opted Boards: Evidence from Firm Innovation
The Financial Review, Forthcoming
41 Pages Posted: 31 Jul 2020
Date Written: 2020
This study documents a positive and robust effect of co-opted boards on firm innovation. This effect is mainly driven by co-opted independent directors. Firms with more co-opted independent directors are associated with lower sensitivities of CEO pay-performance and turnover-performance. It suggests that co-opted boards promote innovation by insulating managers’ career concerns from innovation risk and supporting incentive contracts that motivate innovation. Overall, our study provides new evidence on co-opted boards benefiting firm innovation.
Keywords: corporate governance, board of directors, innovation, patents, citations
JEL Classification: G34, O31
Suggested Citation: Suggested Citation