abstract: Mutual monitoring in a well-structured authority system can mitigate the agency problem. I empirically examine whether the number 2 executive in a firm, if given authority, incentive, and channels for communication and influence, is able to monitor and constrain the potentially self-interested CEO. I find strong evidence that: (1) measures of the presence and extent of mutual monitoring from the No. 2 executive are positively related to future firm value (Tobin's Q); (2) the beneficial effect is more pronounced for firms with weaker corporate governance or CEO incentive alignment, with stronger incentives for the No. 2 executives to monitor, and with higher information asymmetry between the boards and the CEOs; (3) such mutual monitoring reduces the CEO's ability to pursue the "quiet life" but has no effect on "empire building;" and (4) mutual monitoring is a substitute for other governance mechanisms. The results suggest that mutual monitoring by a No. 2 executive provides checks and balances on CEO power. / Dissertation/Thesis / Ph.D. Business Administration 2012
| Identifer | oai:union.ndltd.org:asu.edu/item:14763 |
| Date | January 2012 |
| Contributors | Li, Zhichuan (Author), Coles, Jeffrey (Advisor), Hertzel, Michael (Committee member), Bharath, Sreedhar (Committee member), Babenko, Ilona (Committee member), Arizona State University (Publisher) |
| Source Sets | Arizona State University |
| Language | English |
| Detected Language | English |
| Type | Doctoral Dissertation |
| Format | 100 pages |
| Rights | http://rightsstatements.org/vocab/InC/1.0/, All Rights Reserved |
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