Board structures around the world: An experimental investigation

Gillette, Ann, Noe, Thomas and Rebello, Michael (2008) Board structures around the world: An experimental investigation. Review of Finance, 12 (1). pp. 93-140.


We model and experimentally examine the board structure-performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institutionally preferred policies more frequently, but tend to destroy value by being too conservative, frequently rejecting good projects. Outsidercontrolled single-tiered boards, both when they have multiple insiders and only a single insider, adopt institutionally preferred policies most frequently. In those board designs where the efficient Nash equilibrium produces strictly higher payoffs to all agents than the coalition-proof equilibria, agents tend to select the efficient Nash equilibria.

Item Type: Article
Keywords: outside directors, corporate governance, finance
Subject(s): Finance
Date Deposited: 07 Nov 2011 16:29
Last Modified: 27 Feb 2017 10:05
Funders: N/A

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