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Governance and Politics: Regulating Independence and Diversity in the Board Room

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  • ØYvind Bøhren
  • R. Øystein Strøm

Abstract

This paper analyzes the economic rationale for board regulation in place and for introducing new regulation in the future. We relate the value of the firm to the use of employee directors, board independence, directors with multiple seats, and to gender diversity. Our evidence shows that the firm creates more value for its owners when the board has no employee directors, when its directors have strong links to other boards, and when gender diversity is low. We find no relationship between firm performance and board independence. These characteristics of value‐creating boards support neither popular opinion nor the current politics of corporate governance.

Suggested Citation

  • ØYvind Bøhren & R. Øystein Strøm, 2010. "Governance and Politics: Regulating Independence and Diversity in the Board Room," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(9‐10), pages 1281-1308, November.
    • Handle: RePEc:bla:jbfnac:v:37:y:2010:i:9-10:p:1281-1308
    DOI: 10.1111/j.1468-5957.2010.02222.x
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