Do corporate boards affect firm performance? : New evidence from the financial crisis

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Title: Do corporate boards affect firm performance? : New evidence from the financial crisis
Author: Francis, Bill ; Hasan, Iftekhar ; Wu, Qiang
Organization: Bank of Finland
Series: Bank of Finland Research Discussion Papers
Series number: 11/2012
Year of publication: 2012
Publication date: 8.4.2012
Published in: Published in Review of Financial Economics, Volume 21, Issue 2, April 2012: 39-52
Pages: 54 s.
Keywords: kannattavuus; tuotot; osakkeet; yritykset; johtajat; kriisit; rahoitusmarkkinat; riippumattomuus; johtokunnat
JEL: G01; G30; G34
Abstract: This study uses the current financial crisis as a quasi-experiment to examine whether and to what extent corporate boards affect the performance of firms. Using cumulative stock returns over the crisis to measure of firm performance, we find that board independence, as traditionally defined, does not significantly affect firm performance. However, when we re-define independent directors as outside directors who are less connected with current CEOs, a measure we call true independence, there is a positive and significant relationship between this measure and firm performance. Second, outside financial experts are important for firm performance. Third, board meeting frequencies, director attendance behaviors, and director age also affect firm performance during the crisis. Overall, our results suggest that firm performance during a crisis is a function of firm-level differences in corporate boards. JEL Classification: G01; G30; G34 Keywords: Financial crisis; Boards of directors; Firm performance; True independence
Note: Ilmestynyt myös Review of Financial Economics 21 ; 2 ; 2012.

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