A Theory of Friendly Boards

Adams, Renée and Ferreira, Daniel (2007) A Theory of Friendly Boards. Journal of Finance, 62 (1). pp. 217-250.


We analyze the consequences of the board's dual role as advisor as well as monitor of management. Given this dual role, the CEO faces a trade-off in disclosing information to the board: If he reveals his information, he receives better advice; however, an informed board will also monitor him more intensively. Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, management-friendly boards can be optimal. Using the insights from the model, we analyze the differences between sole and dual board systems. We highlight several policy implications of our analysis.

Item Type: Article
Keywords: chief executive officers, shareholders, corporate governance, information sharing, audit committees, business management, financial management, shareholder value, expected utility, finance
Subject(s): Finance
Date Deposited: 03 Oct 2018 09:22
Last Modified: 03 Oct 2018 09:22
Funders: N/A
URI: http://eureka.sbs.ox.ac.uk/id/eprint/6979

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