Discussion Paper Details

Please find the details for DP5500 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Bottom-Up Corporate Governance

Author(s): Augustin Landier, David Sraer and David Thesmar

Publication Date: February 2006

Keyword(s): acquisition, corporate governance, corporate performance and executives

Programme Area(s): Financial Economics

Abstract: In many instances, 'independently-minded' top-ranking executives can impose strong discipline on their CEO, even though they are formally under his authority. This paper argues that the use of such a disciplining mechanism is a key feature of good corporate governance. We provide robust empirical evidence consistent with the fact that firms with high internal governance are more efficiently run. We empirically label as 'independent from the CEO' a top executive who joined the firm before the current CEO was appointed. In a very robust way, firms with a smaller fraction of independent executives exhibit (1) a lower level of profitability and (2) lower shareholder returns after large acquisitions. These results are unaffected when we control for traditional governance measures such as board independence or other well-studied shareholder-friendly provisions.

For full details and related downloads, please visit:

Bibliographic Reference

Landier, A, Sraer, D and Thesmar, D. 2006. 'Bottom-Up Corporate Governance'. London, Centre for Economic Policy Research.