Document Type

Article

Publication Date

1-1-2007

Abstract

We model and experimentally examine the board structure–performance relationship. We examine single-tiered boards, two-tiered boards, insider-controlled boards, and outsider-controlled boards. We find that even insider-controlled boards frequently adopt institutionally preferred rather than self-interested policies. Two-tiered boards adopt institutionally preferred policies more frequently, but tend to destroy value by being too conservative, frequently rejecting good projects. Outsidercontrolled single-tiered boards, both when they have multiple insiders and only a single insider, adopt institutionally preferred policies most frequently. In those board designs where the efficient Nash equilibrium produces strictly higher payoffs to all agents than the coalition-proof equilibria, agents tend to select the efficient Nash equilibria.

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To learn more about the Andrew Young School of Policy Studies and ExCEN Working Papers Series, visit https://aysps.gsu.edu/ and http://excen.gsu.edu/center/.

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