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Information Control, Career Concerns, and Corporate Governance

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  • FENGHUA SONG
  • ANJAN V. THAKOR

Abstract

We examine corporate governance effectiveness when the CEO generates project ideas and the board of directors screens these ideas for approval. However, the precision of the board's screening information is controlled by the CEO. Moreover, both the CEO and the board have career concerns that interact. The board's career concerns cause it to distort its investment recommendation procyclically, whereas the CEO's career concerns cause her to sometimes reduce the precision of the board's information. Moreover, the CEO sometimes prefers a less able board, and this happens only during economic upturns, suggesting that corporate governance will be weaker during economic upturns.

Suggested Citation

  • Fenghua Song & Anjan V. Thakor, 2006. "Information Control, Career Concerns, and Corporate Governance," Journal of Finance, American Finance Association, vol. 61(4), pages 1845-1896, August.
    • Handle: RePEc:bla:jfinan:v:61:y:2006:i:4:p:1845-1896
    DOI: 10.1111/j.1540-6261.2006.00891.x
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