Financial Disclosure and the Board: A Case for Non-Independent Directors
Posted: 21 Oct 2010 Last revised: 23 Oct 2010
Date Written: September 22, 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 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, there exists an optimal share of independent directors for each company, related to the level of intangible resources.
Keywords: Board of directors, information disclosure, accounting, intangible resources
JEL Classification: G30, M21, D80, M41
Suggested Citation: Suggested Citation