À繫¿¬±¸ Á¦ ±Ç È£ (2018³â 11¿ù)
Asian Review of Financial Research, Vol., No..
pp.344~382
pp.344~382
¡°We Are Advertis¡¯d by Our Loving Friends¡± : CEO-Director Connections
JUNHO PARK Ph.D. candidate in Finance at College of Business, KAIST.
This paper examines the role of CEO-director connections on the value of the firm. Using GMM with a local supply of directors and region-fixed effects as instruments, I conduct empirical analyses on the US firms between 1999 and 2016. The results suggest that there exist both the benefit and the cost of CEO-connected directors. The effect of CEO-connected directors on the firm value is contingent on the firm-specific characteristics. CEO-director connections contribute to the firm by resolving information asymmetry. Thus, it is better to allow CEO-connected directors when other sources of information such as analysts are scarce. On the other hand, such connections exacerbate the agency problem. When the CEO has an incentive to extract a private benefit, the firm value deteriorates by CEO-connected directors. My results suggest that it is necessary to establish the rules on the board of directors by reflecting the firm-specific characteristics such as information transparency.
JUNHO PARK
This paper examines the role of CEO-director connections on the value of the firm. Using GMM with a local supply of directors and region-fixed effects as instruments, I conduct empirical analyses on the US firms between 1999 and 2016. The results suggest that there exist both the benefit and the cost of CEO-connected directors. The effect of CEO-connected directors on the firm value is contingent on the firm-specific characteristics. CEO-director connections contribute to the firm by resolving information asymmetry. Thus, it is better to allow CEO-connected directors when other sources of information such as analysts are scarce. On the other hand, such connections exacerbate the agency problem. When the CEO has an incentive to extract a private benefit, the firm value deteriorates by CEO-connected directors. My results suggest that it is necessary to establish the rules on the board of directors by reflecting the firm-specific characteristics such as information transparency.
The board of directors,CEO-board connectedness,firm value.