Journal article
Under the microscope: An experimental look at board transparency and director monitoring behavior
Strategic management journal, Vol.39(4), pp.1216-1236
04/2018
DOI: 10.1002/smj.2756
Abstract
Research Summary: It is well known in corporate governance scholarship that independent directors differ in the vigilance with which they monitor corporate insiders. This difference depends largely on whether independent directors are concerned more with their public reputation or with their prospects in the director labor market. The explanation for this difference depends on an assumption of information asymmetry, however. In the present study, we relax the assumption of information asymmetry to examine how boardroom transparency affects directors' monitoring behavior. Using a randomized experimental study of actual independent directors, we find that boardroom transparency amplifies the effect of directors' inclinations toward either active or passive monitoring, with directors inclined toward vigilant monitoring becoming even more vigilant, and directors inclined toward passive monitoring becoming even more passive.Managerial Summary: In most advanced economies, the board's internal decision processes are either undisclosed or disclosed only to a very limited extent. It remains unknown, then, whether directors would behave differently if their behaviors were made public. We find that when their actions are disclosed to the public, directors concerned with their public reputations become more vigilant, whereas those concerned with their prospects for additional board seats become more passive in monitoring corporate insiders. Whereas regulatory bodies and corporate governance watchdogs have recently advocated for greater disclosure of the boardroom decision-making process, our study suggests that such mandatory disclosure requirements can exacerbate, rather than alleviate, the problem of passive director monitoring.
Details
- Title: Subtitle
- Under the microscope: An experimental look at board transparency and director monitoring behavior
- Creators
- Weiwen Li - Sun Yat-sen UniversityRyan Krause - Texas Christian UniversityXin Qin - Sun Yat-sen UniversityJunsheng Zhang - Sun Yat-sen UniversityHang Zhu - Sun Yat-sen UniversityShanshan Lin - Sun Yat-sen UniversityYuehua Xu - Sun Yat-sen University
- Resource Type
- Journal article
- Publication Details
- Strategic management journal, Vol.39(4), pp.1216-1236
- DOI
- 10.1002/smj.2756
- ISSN
- 0143-2095
- eISSN
- 1097-0266
- Publisher
- Wiley
- Number of pages
- 21
- Grant note
- 71202095; 71572198; 71232009; 71332004; 71502179; 71672205; 71372155; 71602196 / National Natural Science Foundation of China; National Natural Science Foundation of China (NSFC) 17YJC630037 / Ministry of Education of the People's Republic of China
- Language
- English
- Date published
- 04/2018
- Academic Unit
- Management and Entrepreneurship
- Record Identifier
- 9984936818402771
Metrics
1 Record Views