Management Accounting Section Midyear Meeting

The Many Dials of Corporate Governance

• In Event: Corporate Governance I

Abstract

Firms typically have many options to choose from when setting their overall governance structure. We study the relations between four such choices: board monitoring, board expertise, equity incentives, and information acquisition. In our equilibrium model, equity incentives are positively related to information acquisition and negatively related to board expertise. Unlike the existing literature that views board monitoring and equity incentives as substitutes, we show that equity incentives and monitoring can also be complements. Our analysis highlights how examining the complex interactions among multiple governance choices can improve our understanding of efficient governance.

Authors

• Kevin D Chen, University of Pennsylvania

• Wayne R Guay, University of Pennsylvania

• Richard A Lambert, University of Pennsylvania