A Theory of Board Control and Size

  title={A Theory of Board Control and Size},
  author={M. Harris and Artur Raviv},
  journal={Corporate Finance: Governance},
  • M. Harris, Artur Raviv
  • Published 2005
  • Business
  • Corporate Finance: Governance
  • 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… CONTINUE READING
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