Financial Disclosure and the Board: A Case for Non-Independent Directors
Bologna Univ. Dept. of Economics Working Paper No. 689
29 Pages Posted: 27 Jan 2010
Date Written: January 20, 2010
In listed companies, the Board of directors has ultimate responsibility for information disclosure. The conventional wisdom is that director independence is an essential factor in improving the quality of that disclosure. In a sense, this approach subordinates expertise to independence. We argue that efficient and effective certification may require firm-specific expertise, in particular for intangible-intensive business models. However, this latter form of expertise is negatively related to independence as it is commonly measured and evaluated. Accordingly, the paper develops a formalisation of this trade-off between independence and firm-specific expertise, arguing for an optimal share of independent directors for each company, negatively related to the degree of intangible resources and intangible drivers of performance.
Keywords: Board of directors, information disclosure, accounting, intangible resources, corporate governance
JEL Classification: G30, M21, D80, M41
Suggested Citation: Suggested Citation