Persuasion in corporate boards

• Thesis title in Czech: Modely přesvědčování ve správních radách
• Thesis title in English: Persuasion in corporate boards
• Academic year of topic announcement: 2018/2019
• Thesis type: diploma thesis
• Thesis language: angličtina
• Department: Institute of Economic Studies (23-IES)
• Supervisor: doc. PhDr. Martin Gregor, Ph.D.

Guidelines

This project will take a fresh look on the issue of optimal composition of a corporate board, where the main unit of analysis will be the board in the single-tier (Anglo-Saxon) corporate governance. The project will be a project in microeconomic theory applied in the context of corporate finance. The core question of the project is the analysis of Bayesian persuasion of non-executive board members by management. That is, we will analyze the effect of the management's ex ante control over the structure of information reported to the directors.

References

Baldenius, T., Melumad, N., Meng, X. (2014). Board composition and CEO power. Journal of Financial Economics, 112(1), 53--68.
Baldenius, T., Meng, X., Qiu, L. (2019). Biased Boards. The Accounting Review, forthcoming.
Bergemann, D., Morris, S. (2019). Information Design: A Unified Perspective. Journal of Economic Literature, 57(1), 1–-57.
Chakraborty, A., Yilmaz, B. (2017). Authority, consensus, and governance. The Review of Financial Studies, 30(12), 4267--4316.
Dworczak, P., Martini, G. (2019). The Simple Economics of Optimal Persuasion. Journal of Political Economy, forthcoming.
Kamenica, E., Gentzkow, M. (2011). Bayesian persuasion. American Economic Review, 101(6), 2590--2615.

Preliminary scope of work

There will be two aims: (i) First, we are interested in the differences between Bayesian persuasion vs. cheap talk and verifiable disclosures in general. In particular, we are interested in the information and payoff structures that have been used in the recent analyses of corporate boards. Given limitations of the concavification method under the belief-based approach (Kamenica and Gentzkow, 2011), we will consider employing recently developed techniques in Dworczak and Martini (2019). Alternatively, we will consider a direct signal approach (Bergemann and Morris, 2019). (ii) Second, we are interested in the shareholders' incentive to appoint antagonistic vs. friendly board members when the management is involved in Bayesian persuasion. Broadly speaking, we are interested in the counteractive power of strategic delegation in more general settings in which the CEO's control over the signal structure introduces multiple distortions.

Preliminary scope of work in English

There will be two aims: (i) First, we are interested in the differences between Bayesian persuasion vs. cheap talk and verifiable disclosures in general. In particular, we are interested in the information and payoff structures that have been used in the recent analyses of corporate boards. Given limitations of the concavification method under the belief-based approach (Kamenica and Gentzkow, 2011), we will consider employing recently developed techniques in Dworczak and Martini (2019). Alternatively, we will consider a direct signal approach (Bergemann and Morris, 2019). (ii) Second, we are interested in the shareholders' incentive to appoint antagonistic vs. friendly board members when the management is involved in Bayesian persuasion. Broadly speaking, we are interested in the counteractive power of strategic delegation in more general settings in which the CEO's control over the signal structure introduces multiple distortions.