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Transaction cost economics and corporate governance: the case of CEO age and financial stake

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  • Patrick L. McClelland
  • Jonathan P. O'Brien

Abstract

Agency theory provides a valuable lens for understanding the role and importance of many varied governance mechanisms. We argue that transaction cost economics (TCE) provides a complementary theoretical lens for studying corporate governance because it illuminates the various contingencies that moderate the importance of alternative governance mechanisms. Using agency theory, we argue and find evidence that the confluence of advancing CEO age and large CEO stock holdings will cause the CEO to become overly risk-averse. Moreover, we use TCE to more fully explicate the ensuing performance consequences as well as the contextual factors that critically moderate this relationship. Copyright (C) 2010 John Wiley & Sons, Ltd.

Suggested Citation

  • Patrick L. McClelland & Jonathan P. O'Brien, 2011. "Transaction cost economics and corporate governance: the case of CEO age and financial stake," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 32(3), pages 141-158, April.
    • Handle: RePEc:wly:mgtdec:v:32:y:2011:i:3:p:141-158
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    File URL: http://hdl.handle.net/10.1002/mde.1520
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    Cited by:

    1. Dr. Sonia MOUSSA & Dr. Houssem RACHDI & Aymen AMMERI, 2013. "Governance, Managers’ Entrenchment and Performance: Evidence in French Firms Listed in SBF 120," International Journal of Business and Social Research, LAR Center Press, vol. 3(2), pages 35-48, February.
    2. Gaurav Gupta, 2022. "CEO's age and investment‐cash flow sensitivity," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(6), pages 2212-2224, September.
    3. Chari, Murali D.R. & David, Parthiban & Duru, Augustine & Zhao, Yijiang, 2019. "Bowman's risk-return paradox: An agency theory perspective," Journal of Business Research, Elsevier, vol. 95(C), pages 357-375.
    4. Miller, Danny & Pastoriza, David & Plante, Jean-François, 2019. "Conditioning competitive risk: Competitors’ rank proximity and relative ability," Journal of Economic Psychology, Elsevier, vol. 73(C), pages 161-175.
    5. Ferramosca, Silvia & Allegrini, Marco, 2018. "The complex role of family involvement in earnings management," Journal of Family Business Strategy, Elsevier, vol. 9(2), pages 128-141.
    6. Mehtap A. Eklund, 2024. "CEO compensation and market risk: moderating effect of board size and CEO duality in the Swiss context," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 21(2), pages 227-240, June.
    7. Orens, Raf & Reheul, Anne-Mie, 2013. "Do CEO demographics explain cash holdings in SMEs?," European Management Journal, Elsevier, vol. 31(6), pages 549-563.

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