When are outside directors effective?

• 成果类型: Article
• 署名作者: Duchin, Ran; Matsusaka, John G.; Ozbas, Oguzhan
• 署名单位: University of Southern California; University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2009.12.004
• 发表日期: 2010
• 页码: 195-214
• 关键词: CORPORATE GOVERNANCE; Outside directors; information asymmetry; firm performance; Board regulations

摘要

This paper uses recent regulations that have required some companies to increase the number of outside directors on their boards to generate estimates of the effect of board independence on performance that are largely free from endogeneity problems. Our main finding is that the effectiveness of outside directors depends on the cost of acquiring information about the firm: when the cost of acquiring information is low, performance increases when outsiders are added to the board, and when the cost of information is high, performance worsens when outsiders are added to the board. The estimates provide some of the cleanest estimates to date that board independence matters, and the finding that board effectiveness depends on information cost supports a nascent theoretical literature emphasizing information asymmetry. We also find that firms compose their boards as if they understand that outsider effectiveness varies with information costs. (C) 2009 Elsevier B.V. All rights reserved.