Do Corporate Boards Matter During the Current Financial Crisis?
47 Pages Posted: 29 Feb 2012
Date Written: February 29, 2012
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: Suggested Citation