Boards : independent and committed directors?

Article, Preprint English OPEN
Volonté, Christophe (2015)
  • Publisher: Elsevier
  • Related identifiers: doi: 10.1016/j.irle.2014.10.002
  • Subject: Board of directors; Board independence; Board busyness; External commitments [Corporate governance] | Corporate governance; Board of directors; Board independence; Outside activities
    • jel: jel:G30 | jel:G30; G34; K22 | jel:G34 | jel:K22
      ddc: ddc:330

Regulators, proxy advisors and shareholders are regularly calling for independent directors. However, at the same time, independent directors commonly engage in numerous outside activities potentially reducing their time and commitment with the particular firm. Using Tobin's Q as an approximation of market valuation and controlling for endogeneity, our empirical analysis reveals that neither is independence positively related to firm performance nor are outside activities negatively related to it. Nevertheless, we find that — non-independent — executive directors, former executives and family representatives have a positive relationship with Tobin's Q. Conversely, — independent — outside executives are negatively related with firm valuation. Moreover, the study indicates that the frequency and duration of meetings are negatively affected by the fraction of executive directors on the board. Insiders potentially reduce the need for meetings because of their specialist competence. The results therefore invalidate rules advocating independent directors and oppose the engagement of directors with significant outside activities. published
  • References (56)
    56 references, page 1 of 6

    Adams, R. B. and D. Ferreira, “A Theory of Friendly Boards,” The Journal of Finance, 2007, 62 (1), 217-250.

    , B. E. Hermalin, and M. S. Weisbach, “The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey,” Journal of Economic Literature, 2010, 48 (1), 58-107.

    AFEP-MEDEF, “Code de Gouvernement d'Entreprise des Sociétés Cotées,” Association Française des Entreprises Privées / Mouvement des Entreprises de France, 2008.

    AFG, “Recommendations on Corporate Governance,” Association Française de la Gestion Financière, 2010.

    Agrawal, A. and C. R. Knoeber, “Firm Performance and Mechanisms to Control Agency Problems Between Managers and Shareholders,” The Journal of Financial and Quantitative Analysis, 1996, 31 (3), 377-397.

    and , “Do Some Outside Directors Play a Political Role?,” The Journal of Law and Economics, 2001, 44 (1), 179-198.

    Ahn, S., P. Jiraporn, and Y. S. Kim, “Multiple Directorships and Acquirer Returns,” Journal of Banking and Finance, 2010, 34 (9), 2011-2026.

    Ammann, M., M. Leuenberger, and H. von Wyss, “Eigenschaften von Verwaltungsräten und Unternehmensperformance,” Schweizerische Zeitschrift für Volkswirtschaft und Statistik, 2005, 141 (1), 1-22.

    Anderson, R. C. and D. Reeb, “Board Composition: Balancing Family Influence in S&P 500 Firms,” Administrative Science Quarterly, 2004, 49 (2), 209-237.

    , T. W. Bates, J. M. Bizjak, and M. L. Lemmon, “Corporate Governance and Firm Diversification,” Financial Management, 2000, 29 (1), 5-22.

  • Metrics
    0
    views in OpenAIRE
    14
    views in local repository
    14
    downloads in local repository

    The information is available from the following content providers:

    From Number Of Views Number Of Downloads
    Konstanzer Online-Publikations-System 14 14
Share - Bookmark