TY  - JOUR
AU  - Schoar,Antoinette
AU  - Washington,Ebonya L.
TI  - Are the Seeds of Bad Governance Sown in Good Times?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17061
PY  - 2011
Y2  - May 2011
UR  - http://www.nber.org/papers/w17061
L1  - http://www.nber.org/papers/w17061.pdf
N1  - Author contact info:
Antoinette Schoar
MIT Sloan School of Management
100 Main Street, E62-638
Cambridge, MA  02142
Tel: 617/253-3763
Fax: 617/258-6855
E-Mail: aschoar@mit.edu

Ebonya L. Washington
Yale University
Box 8264
37 Hillhouse, Room 36
New Haven, CT 06520
Tel: 203/432-9901
Fax: 203/432-6323
E-Mail: ebonya.washington@yale.edu
AB  - This paper examines the extent to which the corporate governance structure of a firm arises endogenously in response to its performance. We demonstrate that following periods of abnormally good performance, managers are more likely to call special meetings and to propose and pass governance measures that are contrary to shareholder interests (based on IRRC classification). These results are driven primarily by firms that are characterized as having poor governance according to either the GIM Index or the proportion of activist shareholders. Following these special meetings, we find that the next quarter performance of the firm is negative. Our results are consistent with an interpretation of shareholder inattention to governance following good firm performance or a desire to reward management for good past performance. Overall, our evidence seems more consistent with the former interpretation.
ER  -