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The Active Board Of Directors And Its Effect On The Performance Of The Large Publicly Traded Corporation


  • Paul W. MacAvoy
  • Ira M. Millstein


In recent years, boards of directors have become more active and independent of management in pursuing shareholder interests. But, up to this point, there has been little empirical evidence that active boards help companies produce higher rates of return for their shareholders. In this article, after describing the new board activism, the authors argue that past failures to document an association between independent boards and superior corporate performance can be explained by two features of the research: its concentration on periods prior to the 1990s (when most boards were largely irrelevant) and its use of unreliable proxies (such as a minimum percentage of outside directors) for a well-functioning board. 1999 Morgan Stanley.

Suggested Citation

  • Paul W. MacAvoy & Ira M. Millstein, 1999. "The Active Board Of Directors And Its Effect On The Performance Of The Large Publicly Traded Corporation," Journal of Applied Corporate Finance, Morgan Stanley, vol. 11(4), pages 8-20.
  • Handle: RePEc:bla:jacrfn:v:11:y:1999:i:4:p:8-20

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    References listed on IDEAS

    1. Zvi Griliches, 1989. "Patents: Recent Trends and Puzzles," NBER Working Papers 2922, National Bureau of Economic Research, Inc.
    2. Cohen, Wesley M. & Levin, Richard C., 1989. "Empirical studies of innovation and market structure," Handbook of Industrial Organization,in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 2, chapter 18, pages 1059-1107 Elsevier.
    3. Michael E. Solt, 1993. "SWORD Financing of Innovation in the Biotechnology Industry," Financial Management, Financial Management Association, vol. 22(2), Summer.
    4. Jean O. Lanjouw & Mark Schankerman, 1997. "Stylized Facts of Patent Litigation: Value, Scope and Ownership," NBER Working Papers 6297, National Bureau of Economic Research, Inc.
    5. repec:bla:joares:v:36:y:1998:i::p:199-233 is not listed on IDEAS
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    Cited by:

    1. Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
    2. Fernández Méndez, Carlos & Pathan, Shams & Arrondo García, Rubén, 2015. "Monitoring capabilities of busy and overlap directors: Evidence from Australia," Pacific-Basin Finance Journal, Elsevier, vol. 35(PA), pages 444-469.
    3. Enrichetta Ravina & Paola Sapienza, 2010. "What Do Independent Directors Know? Evidence from Their Trading," NBER Chapters,in: Corporate Governance National Bureau of Economic Research, Inc.
    4. Enrichetta Ravina & Paola Sapienza, 2006. "What Do Outside Directors Know? Evidence From Outsider Trading," 2006 Meeting Papers 882, Society for Economic Dynamics.
    5. Georges Dionne & Thouraya Triki, 2005. "Risk Management and Corporate Governance: the Importance of Independence and Financial Knowledge for the Board and the Audit Committee," Cahiers de recherche 0515, CIRPEE.
    6. Gleason, Kimberly C. & Madura, Jeff & Subrahmanyam, Vijaya, 2007. "Stock exchange governance initiatives: Evidence from the Italian STARs," Journal of Banking & Finance, Elsevier, vol. 31(1), pages 141-159, January.
    7. Paolo Santella & Giulia Paone & Carlo Drago, "undated". "How Independent Are Independent Directors? The Case Of Italy," German Working Papers in Law and Economics 2006-1-1148, Berkeley Electronic Press.
    8. Paolo, Santella & Carlo, Drago & Giulia, Paone, 2007. "Who cares about Director Independence?," MPRA Paper 2288, University Library of Munich, Germany.
    9. Wided Bouaine & Lanouar Charfeddine & Mohamed Arouri & Frédéric Teulon, 2014. "The influence of CEO departure type and board characteristics on firm performance," Working Papers 2014-87, Department of Research, Ipag Business School.
    10. Hunton, James E. & Rose, Jacob M., 2008. "Can directors' self-interests influence accounting choices?," Accounting, Organizations and Society, Elsevier, vol. 33(7-8), pages 783-800.
    11. Constantinos Chalevas & Christos Tzovas, 2010. "The effect of the mandatory adoption of corporate governance mechanisms on earnings manipulation, management effectiveness and firm financing: Evidence from Greece," Managerial Finance, Emerald Group Publishing, vol. 36(3), pages 257-277, February.
    12. Damon Fleming & Chee Chow & Wenbing Su, 2010. "An Exploratory Study of Chinese Accounting Students’ and Auditors’ Audit-specific Ethical Reasoning," Journal of Business Ethics, Springer, vol. 94(3), pages 353-369, July.
    13. Pollio, Gerald & Uchida, Koichi, 1999. "Management background, corporate governance and industrial restructuring: the Japanese upstream petroleum industry," Energy Policy, Elsevier, vol. 27(14), pages 813-832, December.

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