Firms’ Objectives, Board Heterogeneity and Incentives

Assistant Professor of Accounting Dhananjay Nanda's research highlights the consequences of for-profit firms serving social objectives with a view to addressing the question: are multiple objectives better served by a single firm or by multiple firms each focused on a single goal? The research extends the neo-classical view of a for-profit firm to include other stakeholder goals, examining how having multiple goals (shareholder value maximization and social objectives) affects the composition of firms’ board of directors, and consequently, management incentives and performance. The researchers will quantify the financial consequences of for-profit firms serving social objectives. Further, this research will be able to address whether social objectives are better served by for-profit firms or by firms established with the sole objective of serving a social goal. Subsequently, the researchers will extend their frameworks, findings and theory to the social sector using data on the accounting performance of nonprofits. This work will result in a conceptual paper for social sector practitioners interested in blending social and profit objectives and serving multiple stakeholders.

Download initial working paper, Access, Common Agency, and Board Size