Abstract

http://ssrn.com/abstract=1904730
 
 

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The Supply of Corporate Directors and Board Independence


Anzhela Knyazeva


University of Rochester - Simon Graduate School of Business

Diana Knyazeva


University of Rochester - Simon Graduate School of Business

Ronald W. Masulis


University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)

March 26, 2013

Review of Financial Studies 26(6), 1561-1605
ECGI - Finance Working Paper No. 315/2011

Abstract:     
Empirical evidence on the relations between board independence and board decisions and firm performance is generally confounded by serious endogeneity issues. We circumvent these endogeneity problems by demonstrating the strong impact of the local director labor market on board composition. Specifically, we show that proximity to larger pools of local director talent leads to more independent boards for all but the largest quartile of S&P1500. Using local director pools as an instrument for board independence, we document that board independence has a positive effect on firm value and operating performance and CEO fraction of incentive based pay and turnover.

Number of Pages in PDF File: 61

Keywords: board of directors, board expertise, director labor market, location, firm value, firm performance, CEO compensation

JEL Classification: G30, G34

working papers series


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Date posted: August 4, 2011 ; Last revised: May 8, 2013

Suggested Citation

Knyazeva, Anzhela and Knyazeva, Diana and Masulis, Ronald W., The Supply of Corporate Directors and Board Independence (March 26, 2013). Review of Financial Studies 26(6), 1561-1605; ECGI - Finance Working Paper No. 315/2011. Available at SSRN: http://ssrn.com/abstract=1904730 or http://dx.doi.org/10.2139/ssrn.1904730

Contact Information

Anzhela Knyazeva (Contact Author)
University of Rochester - Simon Graduate School of Business ( email )
Rochester, NY 14627
United States
585-275-3102 (Phone)
585-273-1140 (Fax)
Diana Knyazeva
University of Rochester - Simon Graduate School of Business ( email )
3-141 Carol Simon Hall,
University of Rochester
Rochester, NY 14627
United States
(585) 275-3211 (Phone)
(585) 273-1140 (Fax)
Ronald W. Masulis
University of New South Wales - Australian School of Business ( email )
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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