LOG IN창 닫기

  • 회원님의 아이디와 패스워드를 입력해 주세요.
  • 회원이 아니시면 아래 [회원가입]을 눌러 회원가입을 해주시기 바랍니다.

아이디 저장

   

아이디 중복검사창 닫기

HONGGIDONG
사용 가능한 회원 아이디 입니다.

E-mail 중복확인창 닫기

honggildong@naver.com
사용 가능한 E-mail 주소 입니다.

우편번호 검색창 닫기

검색

SEARCH창 닫기

비밀번호 찾기

아이디

성명

E-mail

학술자료 검색

Co-opted Boards and Stock Price Crash Risk

  • Chaehyun Kim School of Business Administration Ulsan National Institute of Science and Technology
  • Junyoup Lee School of Business Administration Ulsan National Institute of Science and Technology
  • Sanggeum Woo School of Business Administration Ulsan National Institute of Science and Technology
We investigate whether co-opted boards increase future stock price crash risk. Co-opted directors appointed after the CEO assume office tend to have allegiance to the CEO, attenuating board monitoring roles. Using a sample of firms for the period 1996-2014, we find robust evidence that board co-option is positively associated with stock crash risk, suggesting that weak monitoring induced by co-opted directors facilitates managerial bad news hoarding activities. Further analyses show that the impact of co-option on crash risk is more pronounced when the CEO has higher career concerns, as measured by product market competition and age, indicating that the CEO who has greater preferences for bad news hoarding is more likely to exploit opportunities relating to attenuated board monitoring to promote their personal benefits. Overall, our findings suggest that board co-option appears to decrease the effectiveness of board monitoring and the role of board monitoring is particularly important when the CEO has stronger incentives to hoard bad news.

  • Chaehyun Kim
  • Junyoup Lee
  • Sanggeum Woo
We investigate whether co-opted boards increase future stock price crash risk. Co-opted directors appointed after the CEO assume office tend to have allegiance to the CEO, attenuating board monitoring roles. Using a sample of firms for the period 1996-2014, we find robust evidence that board co-option is positively associated with stock crash risk, suggesting that weak monitoring induced by co-opted directors facilitates managerial bad news hoarding activities. Further analyses show that the impact of co-option on crash risk is more pronounced when the CEO has higher career concerns, as measured by product market competition and age, indicating that the CEO who has greater preferences for bad news hoarding is more likely to exploit opportunities relating to attenuated board monitoring to promote their personal benefits. Overall, our findings suggest that board co-option appears to decrease the effectiveness of board monitoring and the role of board monitoring is particularly important when the CEO has stronger incentives to hoard bad news.
Co-option, Board Friendliness, Board Monitoring, Independence, Crash Risk