Who cares about Director Independence?
AbstractIn this article we have expanded the analysis of the new dataset we created in Santella, Paone, Drago (2005) which analysed and quantified corporate disclosure on directors formally identified as independent by the forty Italian Blue Chips. We find here a general low level of compliance with independence requirements for both financial and non-financial companies, particularly with regard to the two key independence criteria of not having too many concurring commitments and not having business relationships with the company or an associated company. We also find that financial companies show a lower level of compliance than non-financial ones and are connected with each other and with a few non-financial companies through networks of cross-directorships: two directors (one independent and one executive) who also sit at the same time on another company board. Finally, those non-financial companies that have a relatively fragmented shareholder structure tend to be characterised by higher levels of compliance and disclosure (but not always by lower levels of not compliance) than tightly-controlled non-financial companies, presumably because of sensitivity to a larger pool of small shareholders. Peculiarly, financial companies with fragmented shareholder structure tend to be characterised by low disclosure levels, although such companies are also subject to strong financial supervision.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 2288.
Date of creation: 14 Mar 2007
Date of revision:
corporate governance; independent directors; interlocking directorships; empirical legal studies;
Find related papers by JEL classification:
- K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
- K2 - Law and Economics - - Regulation and Business Law
- K0 - Law and Economics - - General
- G3 - Financial Economics - - Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-BEC-2007-03-24 (Business Economics)
- NEP-LAW-2007-03-24 (Law & Economics)
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