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Firm Performance and Board Committee Structure

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Author Info
Klein, April
Abstract

This article demonstrates a linkage between firm performance and board composition by examining the committee structure of boards and the directors' roles within these committees. Consistent with previous studies, I find little association between firm performance and overall board composition. However, by going into the inner workings of the board via board committee composition, I am able to find significant ties between firm performance and how boards are structured. First, a positive relation is found between the percentage of inside directors on finance and investment committees and accounting and stock market performance measures. Next, firms significantly increasing inside director representation on these two committees experience significantly higher contemporaneous stock returns and return on investments than firms decreasing the percentage of inside directors on these committees. These findings are consistent with Fama and Jensen's assertion that inside directors provide valuable information to boards about the firms' long-term investment decisions. Copyright 1998 by the University of Chicago.

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Publisher Info
Article provided by University of Chicago Press in its journal Journal of Law & Economics.

Volume (Year): 41 (1998)
Issue (Month): 1 (April)
Pages: 275-303
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:ucp:jlawec:v:41:y:1998:i:1:p:275-303

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  2. Renée Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2008. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," NBER Working Papers 14486, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Alexander Bassen & Stefan Prigge & Christine Zöllner, 2008. "Behind Broad Corporate Governance Aggregates: A First Look at Single Provisions of the German Corporate Governance Code," Working Papers 010, Hanseatic University, Germany, Department of Economics. [Downloadable!]
  4. Georges Dionne & Thouraya Triki, 2005. "Risk Management and Corporate Governance: the Importance of Independence and Financial Knowledge for the Board and the Audit Committee," Cahiers de recherche 0515, CIRPEE. [Downloadable!]
  5. Chongwoo Choe & Gloria Tian & Xiangkang Yin, 2008. "Managerial Power, Stock-Based Compensation, And Firm Performance: Theory And Evidence," Monash Economics Working Papers 21/08, Monash University, Department of Economics. [Downloadable!]
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  6. Carretta, Alessandro & Farina, Vincenzo & Schwizer, Paola, 2006. "Evaluating the board of directors of financial intermediaries: competencies, effectiveness and performance," MPRA Paper 8299, University Library of Munich, Germany. [Downloadable!]
  7. Audretsch, David B & Lehmann, Erik, 2002. "Does the New Economy Need New Governance? Ownership, Knowledge and Performance," CEPR Discussion Papers 3626, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  11. Benjamin E. Hermalin & Michael S. Weisbach, 2001. "Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature," NBER Working Papers 8161, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Y. Biondi & P. Giannoccolo & A. Reberioux, 2009. "Efficient monitoring and control in intangibles-driven economies: is full independence always required?," Working Papers 664, Dipartimento Scienze Economiche, Universita' di Bologna. [Downloadable!]
  13. Nachane, D M & Ghosh, Saibal & Ray, Partha, 2005. "Bank nominee directors and corporate performance: micro evidence for India," MPRA Paper 2707, University Library of Munich, Germany. [Downloadable!]
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  18. Joseph Carcello, 2009. "Governance and the Common Good," Journal of Business Ethics, Springer, vol. 89(1), pages 11-18, May. [Downloadable!] (restricted)
  19. Manuel Ammann & Markus Leuenberger & Heinrich von Wyss, 2005. "Eigenschaften von Verwaltungsräten und Unternehmensperformance," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 141(I), pages 1-22, March. [Downloadable!]
  20. Ahmadu Sanda & Aminu S. Mikailu & Tukur Garba, 2005. "Corporate governance mechanisms and firm financial performance in Nigeria," Research Papers RP_149, African Economic Research Consortium. [Downloadable!]
  21. Vagliasindi, Maria, 2008. "The effectiveness of boards of directors of state owned enterprises in developing countries," Policy Research Working Paper Series 4579, The World Bank. [Downloadable!]
  22. William O. Brown, Jr. & Michael T. Maloney, . "Exit, Voice, and the Role of Corporate Directors: Evidence from Acquisition Performance," Claremont Colleges Working Papers 1999-27, Claremont Colleges. [Downloadable!]
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