Boards: Independent and Committed Directors?
AbstractRegulators and shareholders are calling for independent directors. Independent directors, however, have numerous external professional commitments. Using� To- bin’s Q as an approximation� of market valuation and controlling for endogeneity, our empirical analysis reveals that neither external commitments are negatively related to firm� performance nor is independence positively related to it. However,� more precise analyses show that executive directors and family representatives have a positive relationship with Tobin’s Q. In contrast, external executives are negatively correlated 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 invalidate rules� advocating independent directors and oppose the engagement of directors with external commitments.
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Bibliographic InfoPaper provided by Faculty of Business and Economics - University of Basel in its series Working papers with number 2011/12.
Date of creation: 2011
Date of revision:
Corporate governance: Board of directors; Board independence; Board busyness; External commitments;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-01-10 (All new papers)
- NEP-BEC-2012-01-10 (Business Economics)
- NEP-CFN-2012-01-10 (Corporate Finance)
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