A theory of board control and size

Milton Harris*, Artur Raviv

*Corresponding author for this work

Research output: Contribution to journalArticle

336 Scopus citations

Abstract

This article presents a model of optimal control of corporate boards of directors. We determine when one would expect inside versus outside directors to control the board, when the controlling party will delegate decision-making to the other party, the extent of communication between the parties, and the number of outside directors. We show that shareholders can sometimes be better off with an insider-controlled board. We derive endogenous relationships among profits, board control, and the number of outside directors that call into question the usual interpretation of some documented empirical regularities.

Original languageEnglish (US)
Pages (from-to)1797-1832
Number of pages36
JournalReview of Financial Studies
Volume21
Issue number4
DOIs
StatePublished - Jul 1 2008

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Fingerprint Dive into the research topics of 'A theory of board control and size'. Together they form a unique fingerprint.

  • Cite this