While board decisions are crucial to shareholder wealth, the literature often overlooks how shareholder monitoring shapes board governance. Using exogenous variations in investor monitoring intensity caused by unrelated return shocks in portfolio firms, we find that institutional investor distraction weakens board oversight. Distracted institutional investors are less likely to use their votes to discipline ineffective independent directors. As a result, independent directors miss more meetings and boards hold fewer meetings. Further, firms with distracted institutional investors appoint less effective independent directors to their boards, approve higher CEO excess pays and accept greater earnings management, all of which indicate poorer board monitoring quality. Our findings suggest that institutional investor monitoring represents an important determinant of board monitoring incentives.
Keywords: Board of directors, Shareholder activism, Institutional investors, Board monitoring, Shareholder voting, Corporate governance.
JEL classification: G23, G34.
학회소식
[2016년 제 4차] Monitoring the Monitor: Distracted Institutional In
작성자 : 관리자
조회수 : 896
게시일 :
2016-12-21
