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Passivity on the Board of Directors

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  • Chris Yung

Abstract

A CEO proposes a strategic plan to a board of directors acting in an advisory role. Each director supports the plan, opposes it, or delays speaking until other directors act. The option to delay suppresses dissent from bad plans in equilibrium. Delay has a pronounced impact for important decisions and for firms with reputable CEOs who make few errors. I investigate the role of ordering, that is, when directors should be invited to speak as a function of their signal precision.

Suggested Citation

  • Chris Yung, 2023. "Passivity on the Board of Directors," The Review of Corporate Finance Studies, Society for Financial Studies, vol. 12(1), pages 170-190.
    • Handle: RePEc:oup:rcorpf:v:12:y:2023:i:1:p:170-190.
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    File URL: http://hdl.handle.net/10.1093/rcfs/cfac012
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    More about this item

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption

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