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Board Effectiveness: Investigating Payment Asymmetry between Board Members and Shareholders
Wuchun Chi, National Chengchi University
Chung - Yuan Hsu, National Chengchi University
Wan - Ying Lin, National Chengchi University
ABSTRACT. Board members may well be responsible for dissension between themselves and shareholders since they are simultaneously the setters and receivers of both board remuneration and dividends. They may act out of their own personal interests at the expense of external shareholders. We investigate the impact of ownership structure, board structure and control deviation on payment asymmetry, where excessively high remuneration is paid to board members but considerably lower dividends are distributed to shareholders. We find strong evidence confirming that the smaller the shareholdings of board members and outside blockholders are, the more asymmetric the payments are. With controlling family members on the board and a higher percentage of seats held by independent board members, there is a slight reduction in the likelihood and severity of payment asymmetry. Finally, the board seat-control deviation is positively related to the likelihood and severity of payment asymmetry.
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