Improving Corporate Governance: Board Composition, Ownership Structure and the Principal-Agent Problem
Date
2010
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Haverford College. Department of Economics
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Thesis
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Award
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eng
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Haverford users only
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Abstract
The principal-agent problem in corporate governance is a well documented issue. Effects include corporate misbehavior, which can result in crippling consequences for a country’s economy and for the many investors affected by the equity markets. This work examines the mechanisms for aligning manager (agent) and shareholder (principal) interests. In doing so, the role of board composition and ownership structure in providing incentives for managers and executives which maximize shareholder objectives is scrutinized. We find that some level of executive power, in the form of moderate replacement costs, is necessary for optimal firm performance.