Details
| Original language | English |
|---|---|
| Pages (from-to) | 973-1002 |
| Number of pages | 30 |
| Journal | European accounting review |
| Volume | 31 |
| Issue number | 4 |
| Early online date | 11 Mar 2021 |
| Publication status | Published - 2022 |
Abstract
Intuition suggests that shareholders benefit from active boards. We present a model to show that if contract renegotiation is possible, then an active board might not always be desirable from the shareholders' perspective. This happens because low board activity may partially offset the distortion in the manager's incentives caused by the renegotiation option. While the value of low board activity stems from the board's weak monitoring, a strong measurement effect of the board's advising in the manager's performance measures is necessary to implement it. In this case, a sufficiently independent board motivates a low level of board activity.
Keywords
- Board advising, Board composition, Board monitoring, Corporate governance, Managerial incentives
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Accounting
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In: European accounting review, Vol. 31, No. 4, 2022, p. 973-1002.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Board Monitoring and Advising in Dynamic Agency
AU - Katolnik, Svetlana
AU - Kronenberger, Sandra K.
AU - Schöndube, Jens Robert
N1 - Funding Information: The work was supported by the Gottfried Wilhelm Leibniz Universität Hannover research grant “Wege in die Forschung II” Grant No. II-03-2015-11. We are grateful to Robert F. Göx (associate editor) and two anonymous reviewers for their constructive comments and suggestions, which were highly significant in improving the paper. We would also like to thank Jörg Budde, John Christensen, Qintao Fan, Roland Königsgruber, Sebastian Kronenberger, Grete Oll, Christian Riegler and Katrin Weiskirchner-Merten for helpful comments. Participants in the EAA Annual Congress in Maastricht, the GEABA symposium in Basel, the Workshop on Accounting and Economics in Tilburg and the research seminars at SDU Odense and the WU Vienna also provided helpful suggestions.
PY - 2022
Y1 - 2022
N2 - Intuition suggests that shareholders benefit from active boards. We present a model to show that if contract renegotiation is possible, then an active board might not always be desirable from the shareholders' perspective. This happens because low board activity may partially offset the distortion in the manager's incentives caused by the renegotiation option. While the value of low board activity stems from the board's weak monitoring, a strong measurement effect of the board's advising in the manager's performance measures is necessary to implement it. In this case, a sufficiently independent board motivates a low level of board activity.
AB - Intuition suggests that shareholders benefit from active boards. We present a model to show that if contract renegotiation is possible, then an active board might not always be desirable from the shareholders' perspective. This happens because low board activity may partially offset the distortion in the manager's incentives caused by the renegotiation option. While the value of low board activity stems from the board's weak monitoring, a strong measurement effect of the board's advising in the manager's performance measures is necessary to implement it. In this case, a sufficiently independent board motivates a low level of board activity.
KW - Board advising
KW - Board composition
KW - Board monitoring
KW - Corporate governance
KW - Managerial incentives
UR - http://www.scopus.com/inward/record.url?scp=85102527122&partnerID=8YFLogxK
U2 - 10.1080/09638180.2021.1890630
DO - 10.1080/09638180.2021.1890630
M3 - Article
AN - SCOPUS:85102527122
VL - 31
SP - 973
EP - 1002
JO - European accounting review
JF - European accounting review
SN - 0963-8180
IS - 4
ER -