TY - JOUR
T1 - lead Independent Directors
T2 - Good governance or window dressing?
AU - Lamoreaux, Phillip T.
AU - Litov, Lubomir P.
AU - Mauler, Landon M.
N1 - Publisher Copyright:
© 2019 University of Florida, Fisher School of Accounting
PY - 2019/12
Y1 - 2019/12
N2 - We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.
AB - We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.
KW - Board structure
KW - CEO-Chairman
KW - Independent directors
KW - Lead Independent Director
UR - http://www.scopus.com/inward/record.url?scp=85070876266&partnerID=8YFLogxK
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U2 - 10.1016/j.acclit.2019.06.001
DO - 10.1016/j.acclit.2019.06.001
M3 - Article
AN - SCOPUS:85070876266
SN - 0737-4607
VL - 43
SP - 47
EP - 69
JO - Journal of Accounting Literature
JF - Journal of Accounting Literature
ER -