Do Corporate Boards Matter During the Current Financial Crisis?

47 Pages Posted: 29 Feb 2012

See all articles by Qiang Wu

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Date Written: February 29, 2012

Abstract

This study examines the impact of corporate boards on firm performance during the current financial crisis. Using buy-and-hold abnormal returns over the crisis to measure firm performance, we find that board independence, as traditionally defined, does not significantly affect firm performance. However, when we re-define independent directors as outside directors who are less connected with current CEOs, a measure we call strong independence, there is a positive and significant relationship between this measure and firm performance. Second, outside financial experts are important for firm performance. We find that the positive impact of outside financial experts on firm performance is more significant than that of strong independence. Overall, our results suggest that firm performance during a crisis is a function of firm-level differences in corporate boards.

Keywords: Financial crisis, Boards of directors, Independence, Financial experts, Firm performance

JEL Classification: G01, G30, G34

Suggested Citation

Wu, Qiang and Francis, Bill and Hasan, Iftekhar, Do Corporate Boards Matter During the Current Financial Crisis? (February 29, 2012). Review of Financial Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2013561

Qiang Wu (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

110 8th St
Troy, NY 12180
United States
518-276-3338 (Phone)
518-276-8661 (Fax)

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

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