Why Do Firms Appoint CEOs as Outside Directors?
Functioning as an independent oversight group, the board of directors is expected to act in the best interests of a company’s shareholders. But boards that are heavy with outside CEOs are sometimes viewed as being in league with the company’s own executive leadership, lacking the distance necessary to provide unbiased oversight. This study examines why companies choose to appoint CEO directors and who their presence … [ Read more ]
Content: Related Content | Authors: Angie Low, René M. Stulz, Rüdiger Fahlenbrach | Source: Ohio State University | Subject: Corporate Governance
Dividend Policy, Agency Costs, and Earned Equity
In a well done and interesting work, DeAngelo, DeAngelo, and Stulz tie dividend policy and agency costs (particularly the free cash flow problem) together. Their main point is that if firms did not pay dividends, managers would have too much cash at their disposal.
The authors begin by asking the question “why do firms pay dividends.” To answer the question they examine what would happen if … [ Read more ]
Content: Article | Authors: Harry DeAngelo, Linda DeAngelo, René M. Stulz | Subject: Finance