Friendly Boards and Innovation

57 Pages Posted: 20 Nov 2012 Last revised: 20 Jul 2018

See all articles by Jun-Koo Kang

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE)

Angie Low

Nanyang Technological University - Division of Banking & Finance

Le Zhang

Australian National University (ANU) - College of Business and Economics

Date Written: March 1, 2017

Abstract

We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms’ advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.

Keywords: Board of directors, Corporate innovation, Board advising, Social ties, Corporate governance, Firm value

JEL Classification: G34, O32

Suggested Citation

Kang, Jun-Koo and Liu, Wei-Lin and Low, Angie and Zhang, Le, Friendly Boards and Innovation (March 1, 2017). Journal of Empirical Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2177857 or http://dx.doi.org/10.2139/ssrn.2177857

Jun-Koo Kang

Nanyang Technological University (NTU) - Nanyang Business School ( email )

Nanyang Avenue, Block S3-01b-54
Singapore, 639798
Singapore
(+65) 6790-5662 (Phone)
(+65) 6791-3697 (Fax)

HOME PAGE: http://www.nbs.ntu.edu.sg/nbs_corporate/divisions/bnf/index.asp

Wei-Lin Liu

School of Finance, Shanghai University of Finance and Economics (SUFE) ( email )

Shanghai, 200433
China

Angie Low

Nanyang Technological University - Division of Banking & Finance ( email )

Singapore, 639798
Singapore

Le Zhang (Contact Author)

Australian National University (ANU) - College of Business and Economics ( email )

Canberra
Australia

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