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Do corporate boards matter during the current financial crisis?

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  • Francis, Bill B.
  • Hasan, Iftekhar
  • Wu, Qiang

Abstract

This study examines the impact of corporate boards on firm performance during the current financial crisis. Using buy-and-hold abnormal returns over the crisis to measure firm performance, we find that board independence, as traditionally defined, does not significantly affect firm performance. However, when we redefine independent directors as outside directors who are less connected with current CEOs, a measure we call strong independence, there is a positive and significant relationship between this measure and firm performance. Second, outside financial experts are important for firm performance. We find that the positive impact of outside financial experts on firm performance is more significant than that of strong independence. Overall, our results suggest that firm performance during a crisis is a function of firm-level differences in corporate boards.

Suggested Citation

  • Francis, Bill B. & Hasan, Iftekhar & Wu, Qiang, 2012. "Do corporate boards matter during the current financial crisis?," Review of Financial Economics, Elsevier, vol. 21(2), pages 39-52.
  • Handle: RePEc:eee:revfin:v:21:y:2012:i:2:p:39-52
    DOI: 10.1016/j.rfe.2012.03.001
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    More about this item

    Keywords

    Financial crisis; Boards of directors; Independence; Financial experts; Firm performance;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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