Substitutes or complements? Co-opted boards and antitakeover provisions. Issue 3 (6th February 2021)

• Record Type: Journal Article
• Authors: Lee, Eunsuh; Kim, Chaehyun; Lee, Junyoup
• Is Part Of: Applied economics letters. Volume 28:Issue 3(2021)
• Page Start: 186
• Page End: 190
• Publication Date: 2021-02-06
• Subjects: Co-opted boards -- co-option -- board monitoring effectiveness -- antitakeover provisions; G30 -- G34; Economics -- Periodicals; Economics, Mathematical -- Periodicals; 330
• DOI: 10.1080/13504851.2020.1740153
• Languages: English
• ISSNs: 1350-4851

Abstract

ABSTRACT: We examine the relationship between co-opted boards and the adoption of antitakeover provisions (ATPs). Prior studies suggest that co-opted directors appointed after the current CEO assumes office provide weak monitoring. Consistent with the substitution view, we find that firms with greater co-option on the board adopt fewer ATPs. This result suggests that co-opted boards enable CEOs to pursue less additional entrenchment, thereby reducing the adoption of ATPs. Importantly, we find that co-opted boards explain the degree of ATPs beyond the traditional measure of board monitoring effectiveness, and even independent directors are associated with fewer ATPs once they are captured by CEOs.