Survey of Boards’ Monitoring and Advisory Roles

Abstract

In this paper, we survey the literature on corporate boards, with a specific focus on its primary functions of monitoring and advising the CEO. In particular, we consider how board structure and the individual directors’ characteristics, skill sets, connections, busyness, and incentives affect the board’s ability and willingness to perform these dual roles effectively. We also review how endogeneity between board structure and firm outcomes has been addressed in the literature. While the literature on boards is vast, we pay more attention to studies that have emerged subsequent to Adams, Hermalin, and Weisbach (2010). We conclude with suggestions for future research.

This paper is being prepared for inclusion in the "Handbook of Corporate Finance.”

Keywords: Board Monitoring, Board Advising, Corporate Governance, Board Structure, Board Connections, Director Characteristics

JEL Classification: G32, G34, K22