Top Managers’ Political Conservatism and External Governance Choices
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We develop a theory of corporate governance conservatism that reflects the preference of politically conservative chief executive officers (CEOs) for stability and continuity in corporate governance provisions without managerial entrenchment. Our theory suggests that conservative CEOs tend to prefer corporate governance provisions against hostile takeover and drastic board turnover, but their emphasis on hard work and self-discipline are likely to lead them to run their firms more efficiently with less debt. Using a sample of 2,339 U.S. corporations in the 1996-2006 period, we find strong empirical support for this new theory. Firms with Republican CEOs, who are known to be politically conservative, are more likely to stagger the terms and elections of directors, limit shareholders’ ability to amend corporate bylaws and require supermajority for approval of mergers, but those CEOs are not associated with a significant impairment in shareholders’ value. Rather, we find firms run by Republican CEOs tend to have higher return on assets and lower leverage, consistent with the results documented by Hutton, Jiang, and Kumar (2014). Overall, our theory and empirical results highlight an important spillover effect of top managers political conservatism on corporate governance choices. We further discussother dimensions of corporate governance that could also reflect topmanagers’ political conservatism.
Abstract
We develop a theory of corporate governance conservatism that reflects the preference of politically conservative chief executive officers (CEOs) for stability and continuity in corporate governance provisions without managerial entrenchment. Our theory suggests that conservative CEOs tend to prefer corporate governance provisions against hostile takeover and drastic board turnover, but their emphasis on hard work and self-discipline are likely to lead them to run their firms more efficiently with less debt. Using a sample of 2,339 U.S. corporations in the 1996-2006 period, we find strong empirical support for this new theory. Firms with Republican CEOs, who are known to be politically conservative, are more likely to stagger the terms and elections of directors, limit shareholders’ ability to amend corporate bylaws and require supermajority for approval of mergers, but those CEOs are not associated with a significant impairment in shareholders’ value. Rather, we find firms run by Republican CEOs tend to have higher return on assets and lower leverage, consistent with the results documented by Hutton, Jiang, and Kumar (2014). Overall, our theory and empirical results highlight an important spillover effect of top managers political conservatism on corporate governance choices. We further discussother dimensions of corporate governance that could also reflect topmanagers’ political conservatism.
참고문헌 (21)
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