Working Paper: NBER ID: w14486
Authors: Rene Adams; Benjamin E. Hermalin; Michael S. Weisbach
Abstract: This paper is a survey of the literature on boards of directors, with an emphasis on research done subsequent to the Hermalin and Weisbach (2003) survey. The two questions most asked about boards are what determines their makeup and what determines their actions? These questions are fundamentally intertwined, which complicates the study of boards due to the joint endogeneity of makeup and actions. A focus of this survey is on how the literature, theoretical as well as empirically, deals - or on occasions fails to deal - with this complication. We suggest that many studies of boards can best be interpreted as joint statements about both the director-selection process and the effect of board composition on board actions and firm performance.
Keywords: Corporate Governance; Boards of Directors; Endogeneity; Performance
JEL Codes: G3; L22
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| board structure (Y10) | governance challenges (G38) |
| governance challenges (G38) | board structure (Y10) |
| board size (L25) | firm performance (L25) |
| firm performance (L25) | CEO dismissals (M12) |
| board size (L25) | governance challenges (G38) |
| observed governance structures (H11) | performance (D29) |