Board composition, CEO turnover and firm value: the effect of the Sarbanes-Oxley Act
by Mustafa A. Dah; Matthew Hurst
International Journal of Financial Services Management (IJFSM), Vol. 8, No. 3, 2016

Abstract: This paper tests the effect of an exogenous shock, the Sarbanes-Oxley Act (SOX) of 2002, on the structure of corporate boards and their efficiency as a monitoring mechanism. The results suggest an increase in the participation of independent directors at the expense of insiders. Consequently, we investigate the implications of board composition changes on CEO turnover and firm value. We document a significant reduction in CEO turnover in the post-SOX period. We also demonstrate that, after SOX, a board dominated by independent directors is less likely to remove a CEO owing to poor performance. Finally, we highlight a negative association between the change in board composition and firm value. Contrary to the legislators' objectives, we suggest that the change in board structure brings about inefficient monitoring and promotes an unfavourable trade-off between independent directors and insiders.

Online publication date: Sat, 29-Oct-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Financial Services Management (IJFSM):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email