Board independence and managerial authority

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dc.contributor.author Dah, Mustafa
dc.contributor.author Jizi, Mohammad
dc.contributor.author Sbeity, Sadim
dc.date.accessioned 2018-03-16T09:51:26Z
dc.date.available 2018-03-16T09:51:26Z
dc.date.copyright 2018 en_US
dc.date.issued 2018-03-16
dc.identifier.issn 1463-5771 en_US
dc.identifier.uri http://hdl.handle.net/10725/7221 en_US
dc.description.abstract Purpose The imposition of the Sarbanes Oxley Act and the NYSE/NASDAQ regulations boosted the proportion of independent directors serving on corporate boards. For certain firms, increasing the number of independent directors may impose costs that exceed the benefits. This paper examines the implications of increased independence following SOX, relative to the pre-SOX board independence benchmark, on managerial authority and entrenchment within the firm. Design/methodology/approach Data are collected from COMPUSTAT, ExecuComp, and RiskMetrics. Data are divided into two periods, pre-SOX (1996-2001) and post-SOX (2002-2006). The focus is on the sub-group of firms who were not complying with the board independence requirement prior to SOX and became compliant afterwards. Various regressions are employed to assess the implications of increased independence following SOX on managerial authority and entrenchment. Findings The appreciation in board independence post-SOX significantly inflates both managerial compensation and the likelihood of CEO duality. Also, there is a positive association between board independence and managerial entrenchment during both the pre- and post-SOX periods. Imposed board composition requirements diminished board monitoring efficiency and boosted the CEO dominance and control over the firm. Originality/value This research adds to the extant literature investigating the implications of SOX on internal monitoring and governance. The results are based on an off equilibrium phenomenon in which companies were obliged to alter their endogenously determined board structure. Thus, regulations to improve governance could backfire as the CEO might abuse them to extract private benefits. en_US
dc.language.iso en en_US
dc.title Board independence and managerial authority en_US
dc.type Article en_US
dc.description.version Published en_US
dc.author.school SOB en_US
dc.author.idnumber 200104725 en_US
dc.author.idnumber 200201121 en_US
dc.author.department Department of Finance and Accounting (FINA) en_US
dc.description.embargo N/A en_US
dc.relation.journal Benchmarking: An International Journal en_US
dc.journal.volume 25 en_US
dc.journal.issue 3 en_US
dc.article.pages 838-853 en_US
dc.keywords CEO compensation en_US
dc.keywords Sarbanes-Oxley Act en_US
dc.keywords Duality en_US
dc.keywords Board structure en_US
dc.keywords Entrenchment en_US
dc.identifier.doi https://doi.org/10.1108/BIJ-04-2017-0071 en_US
dc.identifier.ctation Dah, M., Jizi, M., & Sbeity, S. (2018). Board independence and managerial authority. Benchmarking: An International Journal, 25(3), 838-853. en_US
dc.author.email mustafa.dah@lau.edu.lb en_US
dc.author.email mohammad.jizi@lau.edu.lb en_US
dc.identifier.tou http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php en_US
dc.identifier.url https://www.emerald.com/insight/content/doi/10.1108/BIJ-04-2017-0071/full/html en_US
dc.orcid.id https://orcid.org/0000-0003-3193-508X en_US
dc.orcid.id https://orcid.org/0000-0002-1911-8215 en_US
dc.author.affiliation Lebanese American University en_US

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