Return to search

Outside directors signaling, monitoring and compensation

This thesis is comprised of three essays dealing with outside directors. The first essay
addresses the signaling role that outside directors play. This is a role that is especially
important for entrepreneurial firms, and has been relatively neglected in corporate
governance research. The primary contribution of this chapter is in developing an analytical
model and predictive framework on which future empirical and analytical research on
directors' signaling role can be based. This chapter also contributes to the signaling theory
literature by deriving a new type of equilibrium — the "stochastic separating equilibrium" —
which may well be applicable in a broader set of models that incorporate signaling through
middlemen. This equilibrium has an important realistic feature in that it permits the
coexistence of both high and low quality firms in equilibrium.
In the second study, I address directors' monitoring role. This essay examines whether a
systematic relationship exists between a board's composition and discrete strategic decisions
of a firm, which have been addressed in the literature as involving potential conflicting
interests between managers and shareholders. To explore this question, I conducted seven
meta-analyses of relevant strategic decisions, on which I could obtain data. The results
provide evidence for the presence of systematic relationships between a board's composition
and five out of the seven strategies examined. Interestingly, these systematic relationships
provide only limited support to the predictions of agency theory, which is the predominant
rational behind this line of research.

In the third essay, I examine the effects of outside directors' stock-based compensation on
one indicator of board monitoring effectiveness: firms' research and development (R&D)
intensity. The results suggest that both the percentage of stock-based compensation and the
proportion of stock options within it are positively related to firms' R & D expenditures.
Moreover, stock-based compensation moderates the relationship between board composition
and R & D intensity. These results highlight the need to reevaluate previous findings that
addressed the effects of board composition on both firm performance and firm strategic
decisions.

Identiferoai:union.ndltd.org:LACETR/oai:collectionscanada.gc.ca:BVAU.2429/13507
Date11 1900
CreatorsDeutsch, Yuval
Source SetsLibrary and Archives Canada ETDs Repository / Centre d'archives des thèses électroniques de Bibliothèque et Archives Canada
LanguageEnglish
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation
RelationUBC Retrospective Theses Digitization Project [http://www.library.ubc.ca/archives/retro_theses/]

Page generated in 0.0019 seconds