Board Advising

41 Pages Posted: 14 Mar 2012 Last revised: 22 Apr 2014

Jeffrey L. Coles

David Eccles School of Business, University of Utah; Arizona State University (ASU) - Finance Department

Naveen D. Daniel

Drexel University - Department of Finance

Lalitha Naveen

Temple University

Date Written: 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.

Keywords: board advising, advising quality, directors, board characteristics, Corporate Governance, firm complexity

JEL Classification: G32, G34, K22

Suggested Citation

Coles, Jeffrey L. and Daniel, Naveen D. and Naveen, Lalitha, Board Advising (February 9, 2012). Available at SSRN: https://ssrn.com/abstract=2002250 or http://dx.doi.org/10.2139/ssrn.2002250

Jeffrey L. Coles

David Eccles School of Business, University of Utah ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-587-9093 (Phone)

Arizona State University (ASU) - Finance Department ( email )

W. P. Carey School of Business
P.O. Box 873906
Tempe, AZ 85287-3906
United States
480-965-4475 (Phone)
480-965-8539 (Fax)

Naveen D. Daniel (Contact Author)

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-5858 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://lebow.drexel.edu/Faculty/DanielN

Lalitha Naveen

Temple University ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-6435 (Phone)

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