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Kim, Seoyoung (2009)
Dissertation (179 pages)
Committee Chair / Thesis Adviser: Jegadeesh, Narasimhan
Committee Members: Chordia, Tarun ; Mian, Shehzad ; Shanken, Jay
Research Fields: Economics, Finance
Keywords: boards of directors; board committees; committee involvement; social ties; board independence; earnings management
Program: Laney Graduate School, Business
Permanent url:


My purpose is to examine the composition and structure of corporate boards, and their
implications for firm performance and monitoring and disciplinary effectiveness. In my
first essay, I explore the nature and extent of financially affiliated directors' involvement
within the board. I find that affiliated directors are given substantially greater committee
involvement when the CEO is directly involved in apportioning committee assignments,
and their involvement is negatively associated with firm value and subsequent operating
performance. In my second essay, I examine how social ties affect a director's capacity to
objectively monitor and discipline the CEO. I find that CEOs enjoy higher compensation
packages that are less sensitive to performance when they share social ties with members
of the board. In my third essay, I examine how social ties affect the financial-reporting
process, as well as how firms respond to increased regulatory constraints concerning
board and committee composition. I find that social ties between the CEO and members
of the audit committee contribute to higher levels of earnings management. Moreover, I
find that audit committees appointing socially affiliated replacements (for the departing
conventionally affiliated members) in the post Sarbanes Oxley period manage earnings
more than those that do not, suggesting the growing importance of social ties as an
alternate, unregulated attempt by which CEOs capture the financial reporting process.

Table of Contents

Table of Contents

Introduction 1

First essay: Affiliated directors: advisors or rubber stamps?
1. Introduction 4
2. Motivation and hypotheses 7
3. Data description and discussion of measures 9
4. CEO, committee, board, and firm characteristics 15
5. Empirical results 23
6. Conclusion 33

Second essay: It pays to have friends
1. Introduction 35
2. Motivation, hypotheses, and identification of social ties 39
3. Data description 45
4. Empirical results 54
5. Contribution and discussion 71
6. Conclusion 74

Third essay: Earnings management and social ties
1. Introduction 75
2. Motivation, identification, and hypotheses 78
3. Data description 82
4. Empirical results 88
5. Conclusion 99

Conclusion 100

Appendices 101

References 120

Tables 129

Figures 168


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