Executive Compensation and Corporate Strategies Ji-Chai Lin Louisiana State University For 2014 Workshop at UESTC. A Theory of Friendly Boards by ADAMS and FERREIRA (2007, JF). This paper analyzes the consequences of the board’s dual role as advisor as well as monitor of management.
= [(Vd + Ve)/Op. Income] × [Op. Income /Assets]
=[Ve/Op Income] × [(Ve + Vd)/Ve] × [Op. Income/Assets]
= (Price to Op. Income) × (Firm Value to Market Value of Equity) ×(Operating Income to Assets)