The Bright Side of Co-Opted Boards: Evidence from Firm Innovation

The Financial Review, Forthcoming

41 Pages Posted: 31 Jul 2020

See all articles by Lily Nguyen

Lily Nguyen

The University of Queensland - UQ Business School

Le Vu

Centre for Global Business, Monash Business School, Monash University

Xiangkang Yin

Deakin University; Financial Research Network (FIRN)

Date Written: 2020

Abstract

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

Nguyen, Lily and Vu, Le and Yin, Xiangkang, The Bright Side of Co-Opted Boards: Evidence from Firm Innovation (2020). The Financial Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3643677

Lily Nguyen

The University of Queensland - UQ Business School ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Le Vu (Contact Author)

Centre for Global Business, Monash Business School, Monash University ( email )

Monash Business School
Monash University
Clayton, VIC 3800
Australia

Xiangkang Yin

Deakin University ( email )

Melbourne, Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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