Work

The Supply of Corporate Directors and Board Independence

Year: 2013

Type: article

Abstract: Empirical evidence on the relations between board independence and board decisions and firm performance is generally confounded by serious endogeneity issues. We circumvent these endogeneity problems by demonstrating the strong impact of the local director labor market on board composition. Specifically, we show that proximity to larger pools of local director talent leads to more independent boards for all but the largest quartile of S&P 1500. Using local director pools as an instrument for board independence, we document that board independence has a positive effect on firm value, operating performance, fraction of CEO incentive-based pay, and CEO turnover.

Source: Review of Financial Studies

DOI: 10.1093/rfs/hht020

Authors: Anzhela Knyazeva, Diana Knyazeva, Ronald W. Masulis

Institutions: University of Rochester, UNSW Sydney

Language: English

Topic: Corporate Finance and Governance

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

SDGs: Decent work and economic growth, Peace, justice, and strong institutions

Open Access status: green

OpenAlex ID: W3122577803