Finance Papers

Document Type

Working Paper

Date of this Version

7-1-2012

DOI

10.2139/ssrn.1866384

Abstract

This paper studies the optimal structure of the board with an emphasis on the expertise of directors. The analysis provides three main results. First, the expertise of a value-maximizing board can harm shareholder value. Second, it is optimal to design a board whose members are biased against the manager, especially when their expertise is high. Third, directors' desire to demonstrate expertise can shift power from the board to the manager on the expense of shareholders. The effect of these reputation concerns is amplified when the communication within the boardroom is transparent.

Keywords

board of directors, communication, information acquisition, expertise, reputation, transparency

Share

COinS
 

Date Posted: 27 November 2017