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The informativeness and ability of independent multi-firm directors


  • Cook, Douglas O.
  • Wang, Huabing (Barbara)


Motivated by SEC regulations requiring a majority of independent directors on corporate boards, we examine director informativeness and ability by observing the trading performance of independent directors who serve on multiple boards. As a proxy for informativeness, we find positive trading performance relative to purchases and sales. More impressive, these performance opportunities appear to be available to market participants who observe directors' Form 4 trades. We do not find evidence that diversification motives or busyness affects director trading performance. On the other hand, we do find that audit and compensation committee memberships enhance director trading performance on the sales side but that committee membership does not affect the profitability of director purchases. In comparison, multi-firm directors out-perform single-firm directors and this performance differential seems to be more attributable to superior ability than to better information.

Suggested Citation

  • Cook, Douglas O. & Wang, Huabing (Barbara), 2011. "The informativeness and ability of independent multi-firm directors," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 108-121, February.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:1:p:108-121

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    References listed on IDEAS

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    Cited by:

    1. Sandra Cavaco & Patricia Crifo & Antoine Rebérioux & Gwenaël Roudaut, 2014. "Independent directors: less informed, but better selected? New evidence from a two-way director-firm fixed effect model," EconomiX Working Papers 2014-58, University of Paris Nanterre, EconomiX.
    2. repec:kap:jbuset:v:146:y:2017:i:2:d:10.1007_s10551-015-2882-z is not listed on IDEAS
    3. Michael Tinggi & Abu Hassan bin Md Isa & Shaharudin Jakpar & Sharifah Sabrina Syed Ali & Salawati Sahari, 2014. "Independent Directors, Moving Forward in Exercising Dominant Role: A Case of Malaysian Firms," International Journal of Business Administration, International Journal of Business Administration, Sciedu Press, vol. 5(5), pages 46-57, September.


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