STRUCTURE AND VOTING BEHAVIOR OF THE BOARD OF DIRECTORS: THEORETICAL AND EXPERIMENTAL EVIDENCES

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Abstract

We examine the value of outsiders by voting behavior of boards. Our model proves that boards with a majority of trustworthy but uninformed outsiders can implement institutionally preferred policies and augment corporate performance by upgrading resource allocation. Our laboratory experiments strongly support this conclusion that higher proportion of appointed outsiders yields more efficient boards. We also find outsider-dominated boards, given enough time, will reduce information asymmetry among directors and thereby execute institutionally preferred policies.

Keywords: Outside Directors, Voting Behavior, Corporate Governance

How to cite this paper: Lia, C.-A., & Lee, K.-C. (2008). Structure and voting behavior of the board of directors: theoretical and experimental evidences. Corporate Ownership & Control, 5(3), 99-113. https://doi.org/10.22495/cocv5i3p11