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This paper analyzes the consequences of the board's dual role as an advisor as well as a monitor of management. As a result of this dual role, the CEO faces a trade-off in disclosing information to the board. On the one hand, if he reveals his information, he gets better advice. On the other hand, a more informed board will monitor him more intensively.
Since an independent board is a tougher monitor, the CEO may be reluctant to share information with it. Thus, our model shows that management-friendly boards can be optimal. Using the insights from the model, we analyze the differences between a sole board system, such as in the United States, and the dual board system, as in various countries in Europe. We highlight several policy implications of our analysis.
Fiduciary duties in the vicinity of insolvency form a notoriously murky area where legal space warps. Courts openly acknowledge that it is difficult to...
We document that, over the last decade, the cross-sectional variation in CEO pay levels has declined precipitously, both at the economy level and within...