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Board independence, firm performance and ownership concentration: Evidence from Chile

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  • Lefort, Fernando
  • Urzúa, Francisco

Abstract

What determines the composition of companies' boards in the context of high ownership concentration? Are independent directors important as an internal governance mechanism in companies with high ownership concentration? Do markets favor companies whose controlling shareholders use voting rights to elect professional directors? Using a four-year, 160-company panel data, and controlling for endogeneity, this paper addresses these three related questions, finding that an increase in the proportion of outside directors affects company value. The paper also finds that companies that present more exacerbated agency conflicts tend to incorporate professional directors to the boards, in an effort to improve corporate governance and ameliorate the agency problem.

Suggested Citation

  • Lefort, Fernando & Urzúa, Francisco, 2008. "Board independence, firm performance and ownership concentration: Evidence from Chile," Journal of Business Research, Elsevier, vol. 61(6), pages 615-622, June.
  • Handle: RePEc:eee:jbrese:v:61:y:2008:i:6:p:615-622
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    References listed on IDEAS

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    Cited by:

    1. Pombo, Carlos & Gutiérrez, Luis H., 2011. "Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups," Journal of Economics and Business, Elsevier, vol. 63(4), pages 251-277, July.
    2. Aymen Ammari & Mohamad Kadria & Abderrazak Ellouze, 2014. "Board Structure and Firm Performance: Evidence from French Firms Listed in SBF 120," International Journal of Economics and Financial Issues, Econjournals, vol. 4(3).
    3. Arosa, Blanca & Iturralde, Txomin & Maseda, Amaia, 2010. "Outsiders on the board of directors and firm performance: Evidence from Spanish non-listed family firms," Journal of Family Business Strategy, Elsevier, vol. 1(4), pages 236-245, December.
    4. Seraj Hamed Bahrawe & Harashid Haron & Ali Nawari Bin Hasan, 2016. "Corporate Governance and Auditor Independence in Saudi Arabia: Literature Review and Proposed Conceptual Framework," International Business Research, Canadian Center of Science and Education, vol. 9(11), pages 1-15, November.
    5. repec:etr:series:v:9:y:2018:i:1:p:022-029 is not listed on IDEAS
    6. Urzúa I., Francisco, 2009. "Too few dividends? Groups' tunneling through chair and board compensation," Journal of Corporate Finance, Elsevier, vol. 15(2), pages 245-256, April.
    7. Herrera-Echeverri, Hernán & Geleilate, Jose Galli & Gaitan-Riaño, Sandra & Haar, Jerry & Soto-Echeverry, Nidia, 2016. "Export behavior and board independence in Colombian family firms: The reverse causality relationship," Journal of Business Research, Elsevier, vol. 69(6), pages 2018-2029.
    8. Houda Ghaya & Gilles Lambert, 2012. "Caractéristiques de la diversité au sein des conseils d’administration et performance financière : une étude empirique sur les entreprises du CAC40," Working Papers of BETA 2012-14, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    9. Kun Wang & Greg Shailer, 2015. "Ownership Concentration And Firm Performance In Emerging Markets: A Meta-Analysis," Journal of Economic Surveys, Wiley Blackwell, vol. 29(2), pages 199-229, April.
    10. González, Maximiliano & Guzmán, Alexander & Pombo, Carlos & Trujillo, María Andréa, 2013. "Corporate governance mechanisms in family firms: Evidence from CEO turnovers," Galeras. Working Papers Series 037, Universidad de Los Andes. Facultad de Administración. School of Management.
    11. Rachdi Houssem & Trabelsi Mohamed Ali & Trad Naama, 2013. "Banking Governance and Risk: The Case of Tunisian Conventional Banks," Review of Economic Perspectives, De Gruyter Open, vol. 13(4), pages 195-206, December.
    12. Siri Terjesen & Eduardo Barbosa Couto & Paulo Morais Francisco, 2016. "Does the presence of independent and female directors impact firm performance? A multi-country study of board diversity," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 20(3), pages 447-483, September.
    13. Mauricio Jara-Bertin & Jean P. Sepulveda, 2014. "Earnings Management and Performance in Family-Controlled Firms:Evidence from an Emerging Economy," Serie Working Papers 01, Universidad del Desarrollo, School of Business and Economics, revised Nov 2014.
    14. Rivo-López, Elena & Villanueva-Villar, Mónica & Lago-Peñas, Santiago, 2014. "Does the composition of the board matter? On the relationship between corporate governance and value creation," MPRA Paper 56597, University Library of Munich, Germany.
    15. repec:eee:fambus:v:8:y:2017:i:2:p:99-108 is not listed on IDEAS
    16. Santiago Lago-Peñas & Elena Rivo-López & Mónica Villanueva-Villar, 2016. "On the relationship between corporate governance and value creation in an economic crisis: Empirical evidence for the Spanish case," Working Papers. Collection C: Family business 1602, Universidade de Vigo, GEN - Governance and Economics research Network.
    17. Hamid Mohsin Jadah & Logasvathi A/P Murugiah & Azira Binti Abdul Adzis, 2016. "The Effect of Board Characteristics on Iraqi Banks Performance," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 6(4), pages 205-214, October.
    18. repec:hit:hitjcm:v:56:y:2015:i:1:p:93-115 is not listed on IDEAS
    19. Céspedes, Jacelly & González, Maximiliano & Molina, Carlos A., 2010. "Ownership and capital structure in Latin America," Journal of Business Research, Elsevier, vol. 63(3), pages 248-254, March.
    20. Theeravanich, Amnaj, 2013. "Director compensation in emerging markets: A case study of Thailand," Journal of Economics and Business, Elsevier, vol. 70(C), pages 71-91.
    21. Collins, Denton & Huang, Henry, 2011. "Management entrenchment and the cost of equity capital," Journal of Business Research, Elsevier, vol. 64(4), pages 356-362, April.
    22. Yahya Ali Al-Matari & Abdullah Kaid Al-Swidi & Faudziah Hanim Bt Fadzil & Ebrahim Mohammed Al-Matari, 2012. "Board of Directors, Audit Committee Characteristics and Performance of Saudi Arabia Listed Companies," International Review of Management and Marketing, Econjournals, vol. 2(4), pages 241-251.

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