Who's Monitoring the Monitor? Do Outside Directors Protect Shareholders' Interests?
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CONTRIBUTORS:
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JOURNAL:
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Financial Review,
40(2),
155 -
172.
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YEAR:
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2005
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PUB TYPE:
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Journal Article
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SUBJECT(S):
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None
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DISCIPLINE:
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Economics
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HTTP:
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LANGUAGE:
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English
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PUB ID:
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103-416-301
(Last edited on
2005/05/31 12:29:46 GMT-6)
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SPONSOR(S):
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ABSTRACT:
The corporate governance literature is rich with empirical tests of the relation between board composition and firm performance. We consider the effect of board composition on a different measure of performance, the probability a firm will be sued by shareholders. We find firms that are defendants in securities litigation have higher proportions of insiders and of gray directors and have smaller boards than a matched group of firms that are not sued, even when controlling for firm value and industry. The results suggest that boards with higher proportions of outside directors do a better job of monitoring management.
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