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Who cares about Director Independence?

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  • Paolo, Santella
  • Carlo, Drago
  • Giulia, Paone

Abstract

In 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 Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 2288.

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Date of creation: 14 Mar 2007
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Handle: RePEc:pra:mprapa:2288

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Keywords: corporate governance; independent directors; interlocking directorships; empirical legal studies;

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References

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Citations

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Cited by:
  1. Angelo Baglioni, 2008. "Shareholders' agreements and voting power. Evidence from Italian listed firms," DISCE - Quaderni dell'Istituto di Economia e Finanza, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) ief0081, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  2. Santella, Paolo & Baffi, Enrico & Drago, Carlo & Lattuca, Dino, 2008. "A Comparative Analysis of the Legal Obstacles to Institutional Investor Activism in Europe and in the US," MPRA Paper 8929, University Library of Munich, Germany.
  3. Angelo Baglioni, 2007. "Corporate Governance as a Commitmente and Signalling Device," DISCE - Quaderni dell'Istituto di Economia e Finanza, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE) ief0075, Università Cattolica del Sacro Cuore, Dipartimenti e Istituti di Scienze Economiche (DISCE).
  4. Pietro Marchetti & Valeria Stefanelli, 2009. "Does the compensation level of outside director depend on its personal profile? Some evidence from UK," Journal of Management and Governance, Springer, Springer, vol. 13(4), pages 325-354, November.

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