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Board Independence and Product Market Competition in Swedish Firms

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  • Trond Randøy
  • Jan Inge Jenssen

Abstract

This study suggests that firms in highly competitive industries should have fewer outside board members, whereas companies operating in less competitive industries should have more outside directors. Specifically, we argue that board independence is less relevant or even redundant in highly competitive industries, where the firm is already “monitored” by a competitive product market. Using publicly traded Swedish firms for empirical testing, this study finds that board independence reduces firm performance in industries with highly competitive product markets. On the other hand, board independence enhances firm performance among companies facing less competitive product markets.

Suggested Citation

  • Trond Randøy & Jan Inge Jenssen, 2004. "Board Independence and Product Market Competition in Swedish Firms," Corporate Governance: An International Review, Wiley Blackwell, vol. 12(3), pages 281-289, July.
    • Handle: RePEc:bla:corgov:v:12:y:2004:i:3:p:281-289
    DOI: 10.1111/j.1467-8683.2004.00369.x
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    Cited by:

    1. Theodore Syriopoulos & Michael Tsatsaronis, 2012. "Corporate Governance Mechanisms and Financial Performance: CEO Duality in Shipping Firms," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 2(1), pages 1-30, June.
    2. Cao, Yue & Dong, Yizhe & Ma, Diandian & Sun, Li, 2021. "Customer concentration and corporate risk-taking," Journal of Financial Stability, Elsevier, vol. 54(C).
    3. Johanna Palmberg, 2015. "The performance effect of corporate board of directors," European Journal of Law and Economics, Springer, vol. 40(2), pages 273-292, October.
    4. Yuliya Ponomareva, 2019. "Balancing control and delegation: the moderating influence of managerial discretion on performance effects of board monitoring and CEO human capital," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(1), pages 195-225, March.
    5. Iwasaki, Ichiro, 2008. "The determinants of board composition in a transforming economy: Evidence from Russia," Journal of Corporate Finance, Elsevier, vol. 14(5), pages 532-549, December.
    6. Bello Lawal, 2016. "Still on board configuration: SEC recommendations and the efficiency of adhering firms in Nigeria," Journal of Economic and Financial Studies (JEFS), LAR Center Press, vol. 4(2), pages 1-23, April.
    7. Rita Lamboglia & Francesco Paolone & Daniela Mancini, 2019. "Determinants of the implementation of environmental risk indicators: Empirical evidence from the Italian manufacturing context," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 26(2), pages 307-316, March.
    8. Syrine Sassi & Narjess Toumi, 2018. "Product market competition and analyst following," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 22(1), pages 55-88, March.
    9. Kim, Incheol & Lee, Suin & Sharma, Bina, 2023. "Competition law reform and firm performance: Evidence from developing countries," Emerging Markets Review, Elsevier, vol. 56(C).
    10. Ho, Joanna & Huang, Cheng Jen & Karuna, Christo, 2020. "Large shareholder ownership types and board governance," Journal of Corporate Finance, Elsevier, vol. 65(C).
    11. Yi Wang & Judith Oliver, 2009. "Board composition and firm performance variance: Australian evidence," Accounting Research Journal, Emerald Group Publishing Limited, vol. 22(2), pages 196-212, September.
    12. Wang, Li-Hsun & Lin, Chu-Hsiung & Fung, Hung-Gay & Chen, Hsien-Ming, 2015. "Governance mechanisms and downside risk," Pacific-Basin Finance Journal, Elsevier, vol. 35(PB), pages 485-498.

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