Board executive committees, board decisions, and firm value

Abstract

We study board executive committees for which, despite their broad powers, there exists limited empirical evidence. We find empirically robust evidence that firms with executive committees have lower market values. We also identify a link between executive committees, CEO turnover, and investment policies. This evidence suggests that, on balance, the agency and information costs associated with executive committee use outweigh the corresponding benefits. Together with technological advancements, our findings help to explain the sharp decline in executive committee use in recent years.