TY - JOUR
T1 - lead Independent Directors
T2 - Good governance or window dressing?
AU - Lamoreaux, Phillip T.
AU - Litov, Lubomir P.
AU - Mauler, Landon M.
N1 - Funding Information:
For valuable discussions and comments we thank Vikas Agarwal, David Brown, Dan Dhaliwal, Eliezer Fich, Kose John, Ivalina Kalcheva, Eric Kelley, Omesh Kini, Sandy Klasa, James Linck, William Megginson, Shawn Mobbs, Chip Ryan, Simone Sepe, Richard Sias, Aazam Virani, and participants at workshops at the University of Arizona, University of Florida, University of Oklahoma, and Georgia State University, as well as participants at the American Accounting Association annual meeting in 2012 in Washington, D.C. participants in the Financial Management Association meeting 2015 in Orlando, Florida, and participants in the 34th Southwest Symposium in 2017 in Tulsa, Oklahoma. For valuable research assistance, we thank Mandy Chan, Davis Ewoldt, Gabriele Lattanzio, Noah Myers, Hedieh Rashidi, Michael Rose, Amanda Sherer, and Yanbo Wang. The authors gratefully acknowledge research support from their corresponding institutions.
Publisher Copyright:
© 2019 University of Florida, Fisher School of Accounting
PY - 2019/12
Y1 - 2019/12
N2 - We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.
AB - We document the emergence of the Lead Independent Director (LID) board role in a sample of U.S. firms from 1999–2015. We find that firms that adopt an LID board role are larger and have more independent boards, higher institutional investor holdings, and an NYSE listing. Firms with greater anticipated benefits from monitoring also adopt an LID role, e.g., firms with dual CEO-Chairman, with more takeover defense mechanisms, and with higher cash holdings. Using an event study methodology, we find that investors respond positively to the adoption of an LID board role. Lastly, using instrumental variables to address endogeneity in the LID board role, we find that firms with an LID are more likely to terminate poorly performing CEOs. Taken as a whole, these results suggest that the LID board role enhances firm value and improves the quality of corporate governance.
KW - Board structure
KW - CEO-Chairman
KW - Independent directors
KW - Lead Independent Director
UR - http://www.scopus.com/inward/record.url?scp=85070876266&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=85070876266&partnerID=8YFLogxK
U2 - 10.1016/j.acclit.2019.06.001
DO - 10.1016/j.acclit.2019.06.001
M3 - Article
AN - SCOPUS:85070876266
SN - 0737-4607
VL - 43
SP - 47
EP - 69
JO - Journal of Accounting Literature
JF - Journal of Accounting Literature
ER -