scholarly journals Industry Expertise of Independent Directors and Board Monitoring

2013 ◽  
Author(s):  
Cong Wang ◽  
Fei Xie ◽  
Min Zhu
Keyword(s):  
Independent Directors ◽  
Board Monitoring ◽  
Industry Expertise

scholarly journals Industry Expertise of Independent Directors and Board Monitoring

2015 ◽  
Vol 50 (5) ◽  
pp. 929-962 ◽  
Author(s):  
Cong Wang ◽  
Fei Xie ◽  
Min Zhu
Keyword(s):  
Earnings Management ◽  
Chief Executive Officer ◽  
Audit Committee ◽  
Chief Executive ◽  
Ceo Turnover ◽  
Independent Directors ◽  
Compensation Committee ◽  
Board Monitoring ◽  
Industry Experience ◽  
Industry Expertise

AbstractWe examine whether the industry expertise of independent directors affects board monitoring effectiveness. We find that the presence of independent directors with industry experience on a firm’s audit committee significantly curtails firms’ earnings management. In addition, a greater representation of independent directors with industry expertise on a firm’s compensation committee reduces chief executive officer (CEO) excess compensation, and a greater presence of such directors on the full board increases the CEO turnover-performance sensitivity and improves acquirer returns from diversifying acquisitions. Overall, the evidence is consistent with the hypothesis that having relevant industry expertise enhances independent directors’ ability to perform their monitoring function.

Are social connections of independent directors all the same? Evidence from corporate monitoring

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Zhe Li ◽  
Emre Unlu ◽  
Julie Wu
Keyword(s):  
Firm Value ◽  
Independent Directors ◽  
Social Connections ◽  
Board Members ◽  
Corporate Boards ◽  
Cross Sectional ◽  
Content Type ◽  
Board Monitoring ◽  
Primary Focus ◽  
Monitoring Quality

PurposeStudies on corporate boards examine how social ties between the CEO and independent board members affect the effectiveness of board monitoring. Much evidence suggests that social connections between the CEO and independent directors are associated with inadequate monitoring and lower firm value (Hwang and Kim, 2009; Fracassi and Tate, 2012). In this study, the authors note that social connections of the independent directors are of different nature and thus should not be treated as a homogeneous group; that is, the nature of connections among directors can be quite different from that between the CEO and directors, which is the primary focus of previous studies.Design/methodology/approachThe authors classify independent directors into four mutually exclusive groups based on their social connections to the CEO and other independent board members and examine what role each type of connection plays in corporate monitoring using panel data and cross-sectional fixed effect regressions.FindingsThe authors find that Only_CEO%, the proportion of independent directors who are connected only to the CEO, is negatively associated with monitoring intensity. Specifically, firms with higher Only_CEO% have larger CEO compensation, lower likelihood of dismissing the CEO, more co-opted board and worse firm performance. In contrast, No_CEO_Ind%, the proportion of independent directors who have no connection to either the CEO or other independent directors is associated with more effective monitoring. These findings suggest that independent directors with different degrees of social connections exhibit different monitoring qualities.Practical implicationsWhen more independent directors, who are connected exclusively to the CEO, are on the board, they consistently deliver low monitoring quality. However, when more independent directors with no connections to either the CEO or any independent directors are on the board, they enhance monitoring quality. These findings can be used to construct board structures with more effective monitoring ability.Originality/valueThis paper extends the literature on social networks in corporate finance. The authors show that independent directors with exclusive connections to other independent directors do not have a significant effect on board monitoring, but those truly independent directors are associated with better monitoring quality. These findings suggest that different types of social connections of independent directors play a different role in board monitoring and help extend our understanding of the function of social connections of independent directors in corporate governance.

Board independence and managerial authority

2018 ◽  
Vol 25 (3) ◽  
pp. 838-853 ◽  
Author(s):  
Mustafa Dah ◽  
Mohammad Jizi ◽  
Sadim Sbeity
Keyword(s):  
Positive Association ◽  
Managerial Compensation ◽  
Independent Directors ◽  
Board Independence ◽  
Board Structure ◽  
Corporate Boards ◽  
Content Type ◽  
Sarbanes Oxley ◽  
Managerial Authority ◽  
Board Monitoring

Purpose The imposition of the Sarbanes Oxley (SOX) Act and the NYSE/NASDAQ regulations boosted the proportion of independent directors serving on corporate boards. For certain firms, increasing the number of independent directors may impose costs that exceed the benefits. The purpose of this paper is to examine the implications of increased independence following SOX, relative to the pre-SOX board independence benchmark, on managerial authority and entrenchment within the firm. Design/methodology/approach Data are collected from COMPUSTAT, ExecuComp, and RiskMetrics. Data are divided into two periods, pre-SOX (1996-2001) and post-SOX (2002-2006). The focus is on the sub-group of firms who were not complying with the board independence requirement prior to SOX and became compliant afterwards. Various regressions are employed to assess the implications of increased independence following SOX on managerial authority and entrenchment. Findings The appreciation in board independence post-SOX significantly inflates both managerial compensation and the likelihood of CEO duality. Also, there is a positive association between board independence and managerial entrenchment during both the pre- and post-SOX periods. Imposed board composition requirements diminished board monitoring efficiency and boosted the CEO dominance and control over the firm. Originality/value This research adds to the extant literature investigating the implications of SOX on internal monitoring and governance. The results are based on an off-equilibrium phenomenon in which companies were obliged to alter their endogenously determined board structure. Thus, regulations to improve governance could backfire as the CEO might abuse them to extract private benefits.

scholarly journals The influence of the board on firm performance: An empirical vision in the Spanish capital market

2006 ◽  
Vol 3 (3) ◽  
pp. 199-203
Author(s):  
Emma García-Meca ◽  
Juan Pedro Sánchez-Ballesta
Keyword(s):  
Corporate Governance ◽  
Firm Performance ◽  
Firm Value ◽  
Legal Protection ◽  
Independent Directors ◽  
Outside Directors ◽  
High Concentration ◽  
Governance System ◽  
Board Monitoring ◽  
And Performance

Corporate governance research suggests that board monitoring will be more effective if boards consist primarily of independent outside directors. However, the results of previous studies testing board effectiveness have been mixed. We offer new insights of these relationships in a country whose particular corporate governance system is characterized by high concentration of ownership, mainly through pyramidal groups, and low legal protection of investors. Specifically, the aim of this paper is to investigate the influence of the independent directors on firm performance in Spain. We find that the addition of independent directors to the boards increases firm value, as the relationship between the proportion of independent directors and performance is positive and significant

scholarly journals Is non-executive directors’ pay or industry expertise related to takeover premiums, abnormal returns and offer price revisions?

2016 ◽  
Vol 42 (3) ◽  
pp. 355-375 ◽  
Author(s):  
Martin Bugeja ◽  
Zoltan Matolcsy ◽  
Wassila Mehdi ◽  
Helen Spiropoulos
Keyword(s):  
Market Reaction ◽  
Abnormal Returns ◽  
Negative Association ◽  
Executive Directors ◽  
Target Firm ◽  
Listed Firms ◽  
Lower Likelihood ◽  
Board Monitoring ◽  
Bid Premium ◽  
Industry Expertise

We examine the association between various takeover outcomes and bidding firm non-executive directors’ (NEDs) compensation and expertise in the target firm industry. In our sample of 272 acquisitions by ASX listed firms between 2004 and 2011, we find that NEDs’ relative compensation and industry expertise have a negative association with the bid premium. We also find that NEDs’ relative compensation is positively associated with the bidding firm’s market reaction to the takeover announcement, and NEDs’ industry expertise is associated with a lower likelihood of an increase in the offer price, particularly for M&As viewed negatively by the market. These results are consistent with higher NEDs’ relative compensation and industry expertise leading to more effective board monitoring and advising.

Commercial Drivers' Initial Attitudes toward an On-Board Monitoring System

2012 ◽  
Author(s):  
Yiyun Peng ◽  
Mahtab Ghazizadeh ◽  
Linda Ng Boyle ◽  
John D. Lee
Keyword(s):  
Monitoring System ◽  
Commercial Drivers ◽  
Board Monitoring
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