The bright side of co-opted boards: Evidence from firm innovation

摘要

This study documents a positive and robust effect of co-opted boards on firm innovation. This effect is mainly driven by co-opted independent directors. Firms with more co-opted independent directors are associated with lower sensitivities of CEO pay and turnover to performance. It suggests that co-opted boards promote innovation by insulating managers' career concerns from innovation risk and supporting incentive contracts that motivate innovation. Overall, our study provides new evidence on co-opted boards benefiting firm innovation.