Board Composition and Corporate Control: Evidence from the Insurance Industry

J. OF BUSINESS, Vol. 70 No. 1, January 1997

Posted: 28 Oct 1996

See all articles by David Mayers

David Mayers

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School

Clifford W. Smith

Simon Graduate School of Business, University of Rochester

Abstract

We investigate the role of outside directors in the corporate-control process by exploiting variation in ownership structure within the insurance industry. In mutuals, ownership rights are not transferable. This inalienability restricts the effectiveness of control mechanisms like external takeovers, thus increasing the importance of monitoring by outside directors. Consistent with this hypothesis we find: (1) mutuals employ more outside directors than stocks; (2) firms that switch between stock and mutual charters make corresponding changes in board composition; (3) mutuals' bylaws more frequently stipulate participation by outside directors; and (4) mutuals with more outside directors make lower expenditures on salaries, wages, and rent.

JEL Classification: G3

Suggested Citation

Mayers, David and Shivdasani, Anil and Smith, Clifford W., Board Composition and Corporate Control: Evidence from the Insurance Industry. J. OF BUSINESS, Vol. 70 No. 1, January 1997. Available at SSRN: https://ssrn.com/abstract=7852

David Mayers

University of California, Riverside (UCR) - A. Gary Anderson Graduate School of Management ( email )

Riverside, CA 92521
United States
909-787-3443 (Phone)
909-787-2933 (Fax)

Anil Shivdasani

University of North Carolina Kenan-Flagler Business School ( email )

Kenan-Flagler Business School
Chapel Hill, NC 27599-3490
United States
919-962-3182 (Phone)
919-962-2068 (Fax)

Clifford W. Smith (Contact Author)

Simon Graduate School of Business, University of Rochester ( email )

Carol Simon Hall 3-202C
Rochester, NY 14627
United States
585-275-3217 (Phone)
585-442-6323 (Fax)

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