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Board AdvisingJeffrey L. ColesArizona State University (ASU) - Finance Department Naveen D. DanielDrexel University - Department of Finance Lalitha NaveenTemple University February 9, 2012 Abstract: While the fraction of independent directors has been widely used as a proxy for monitoring effectiveness of the board, there are no clear-cut measures that capture the advising effectiveness of the board. We develop and validate two new measures of board advising: (i) per-outside-director advising quality; and (ii) aggregate board advising capability. These measures, which are based on connections of outside directors to directors on other boards, offer the advantage of being easy to compute from readily available data. We find that as firm demand for advising, as measured by firm complexity, increases: (i) both advising quality and total advising increase; and (ii) the sensitivity of firm value to both advising quality and total advising increase.
Number of Pages in PDF File: 41 Keywords: board advising, advising quality, directors, board characteristics, Corporate Governance, firm complexity JEL Classification: G32, G34, K22 working papers seriesDate posted: March 14, 2012 ; Last revised: March 16, 2012Suggested CitationContact Information
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