The Interaction of Insiders and Outsiders in Monitoring: A Theory of Corporate Boards

Do corporate governance attributes affect adverse selection costs? Evidence from seasoned equity offerings

“…Monks and Minnow (1995) and Anderson et al (2004) make similar arguments. In a related line of research, Boone et al (2007), Coles et al (2006), Linck et al (2006), and Raheja (2005) find that the optimality of board size is situational. For instance, Coles et al (2006) find that larger boards are, on average, associated with better performance and value for firms with greater advising needs, such as large firms, highly levered firms, and firms that operate in multiple business segments.…”

Determinants of the Size and Composition of US Corporate Boards: 1935‐2000

“…Their model provides an alternative, noncausal explanation for an observed correlation (negative or otherwise) between firm profits and board size. Raheja (2005) models the trade-off between the higher agency costs of greater insider representation on boards and the higher coordination/information costs of greater outsider representation. Raheja's model predicts that smaller boards are not more useful unconditionally; they are likely to be more useful in highly competitive industries.…”

Agency costs, corporate governance mechanisms and ownership structure in large UK publicly quoted companies: A panel data analysis

“…This suggests that existing board structures represent an optimal outcome given the costs and benefits associated with different types of director. Raheja (2005) argued that executive directors benefit the company because of the extent of their firmspecific information. Numerous studies support the view that non-executive directors have a positive effect and find that boards dominated by nonexecutive directors are more likely to act in shareholders' best interests (for example, Weisbach 1988, Borokhovich et al 1996, Hermalin and Weisbach 1988, Byrd and Hickman 1992, Brickley et al 1994.…”