Corporate Governance and Cost Management: Evidence from Global Board Reforms

50 Pages Posted: 25 Feb 2021

See all articles by Thomas R. Loy

Thomas R. Loy

University of Bremen

Sven Hartlieb

University of Innsbruck

Date Written: February 24, 2021


Using data on the staggered adoption of board reforms across the globe, we study the effects of corporate governance on cost management. Boards discuss and decide on a wide range of issues with far-reaching implications for corporate cost behavior. We find that board reforms, which predominantly aim to increase board independence as well as establish board committees, restrict managerial opportunism in terms of cost behavior. While critics of board reform legislation note that increases in board independence and monitoring efficiency are rather “cosmetic”, we show that the staggered, worldwide adoption of board reforms results in a decrease in cost asymmetry between 50 and 75 percent, depending on the specification. Our results are robust to a range of modifications, additional tests and influential variables discussed in the still limited literature on international cost behavior.

Keywords: Board Reforms, Cost Stickiness, Cross-Country Study, Corporate Governance, Empire Building, Resource Adjustments

JEL Classification: G34, M40

Suggested Citation

Loy, Thomas R. and Hartlieb, Sven, Corporate Governance and Cost Management: Evidence from Global Board Reforms (February 24, 2021). Available at SSRN: or

Thomas R. Loy (Contact Author)

University of Bremen ( email )

Universitaetsallee GW I
Bremen, D-28334

Sven Hartlieb

University of Innsbruck ( email )

Universitätsstraße 15
Innsbruck, 6020

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