The Performance Effects of Corporate Board of Directors
AbstractThis paper examines the relationship between the board-member independence, family control, and financial performance in Swedish listed firms. The degree of independence is defined with respect to the principal owners, the management of the firm, and the employees. The definition of independence, as applied by the Swedish Code of Corporate Governance, together with good accessibility of detailed data on corporate governance variables, makes it possible to apply a precise measure of board-member independency. The analysis indicates that directors, dependent on the management of the firm dominates the board of director. Board-member independency is found positively affect a firm's financial performance. The negative effect of board-member dependency originates from the firm-related directors whereas dependency on principal owners, families, and employees does not have any impact on the firm investment performance. The results are important in the contemporary political debate about the role of the board of directors as well as its composition. The analysis shows that the definition of independency is important when discussing the board of directors; directors, independent of the firm, not on principal owners, influence the firm investment performance positively.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 187.
Length: 30 pages
Date of creation: 28 Feb 2012
Date of revision:
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Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden
Phone: 08-441 59 00
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Board Dependency; Family Control; Returns on Investment; Marginal q;
Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm
- L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-BEC-2012-03-08 (Business Economics)
- NEP-CSE-2012-03-08 (Economics of Strategic Management)
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