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Board structure and role of outside directors in private firms

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Listed:
  • Huasheng Gao
  • Zhongda He

Abstract

We examine the board composition and the role of outside directors in US private firms. We find that compared with public firms, private firms have a higher proportion of outside directors on the boards and select their outside directors in a more responsive way to their advisory and monitoring needs. We also find that private firms’ CEO turnover–performance sensitivity, earnings quality, going‐public likelihood, and IPO value increase with the proportion of outside directors. These results are consistent with the view that lack of external governance in private firms leads to a greater demand for board monitoring for private firms.

Suggested Citation

  • Huasheng Gao & Zhongda He, 2019. "Board structure and role of outside directors in private firms," European Financial Management, European Financial Management Association, vol. 25(4), pages 861-907, September.
    • Handle: RePEc:bla:eufman:v:25:y:2019:i:4:p:861-907
    DOI: 10.1111/eufm.12191
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    Cited by:

    1. Marie Lalanne, 2023. "Network‐based appointments and board diversity," Economica, London School of Economics and Political Science, vol. 90(358), pages 409-452, April.
    2. Yuan‐Teng Hsu & Chia‐Wei Huang, 2020. "Why do stock repurchases change over time?," European Financial Management, European Financial Management Association, vol. 26(4), pages 938-957, September.
    3. Jiaying Fan & Kai Wang & Lidong Wu, 2023. "Monitoring the Type I Agency Problem or the Type II Agency Problem? Directors Appointed by Non-State Shareholders and the CEO Turnover–Performance Sensitivity," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 59(7), pages 2160-2189, May.
    4. Cui, Di & Ding, Mingfa & He, Zhongda & Shen, Mi, 2022. "Restricted shares and CSR: Evidence from foreign strategic investors in China," Pacific-Basin Finance Journal, Elsevier, vol. 76(C).
    5. Florackis, Chris & Fu, Xi & Wang, Jingjing, 2023. "Political connections, environmental violations and punishment: Evidence from heavily polluting firms," International Review of Financial Analysis, Elsevier, vol. 88(C).
    6. Jelle Schepers & Wim Voordeckers & Tensie Steijvers & Eddy Laveren, 2021. "Entrepreneurial intention-action gap in family firms: bifurcation bias and the board of directors as an economizing mechanism," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 11(3), pages 451-475, September.

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