Board Independence and Information Asymmetry in Family Firms vs. Non-Family Firms

Wu, K., Sorensen, S., & Sun, L. (2019). Board independence and information asymmetry: family firms vs non-family firms. Asian Review of Accounting

42 Pages Posted: 12 Sep 2019

See all articles by Kean Wu

Kean Wu

Rochester Institute of Technology

Susan Sorensen

University of Houston, Clear Lake

Li Sun

University of Tulsa

Date Written: March 15, 2018

Abstract

This study investigates the role of independent board members in insider-controlled firms by examining the effectiveness of independent boards in reducing information asymmetry in family versus non-family firms. We show a negative relation between the proportion of independent directors and information asymmetry, proxied by trading volume, the bid-ask spread, and price volatility. We also find negative relation is more pronounced for a family firm versus a non-family firm. These results are robust after controlling for the endogenous choice of board members in various models. Our findings ease the concern that founding families may over-ride independent boards and exhibit opportunistic behavior.

Keywords: Family Firm, Board independence Information asymmetry

JEL Classification: D82, G34, L22

Suggested Citation

Wu, Kean and Sorensen, Susan and Sun, Li, Board Independence and Information Asymmetry in Family Firms vs. Non-Family Firms (March 15, 2018). Wu, K., Sorensen, S., & Sun, L. (2019). Board independence and information asymmetry: family firms vs non-family firms. Asian Review of Accounting. Available at SSRN: https://ssrn.com/abstract=3448126

Kean Wu (Contact Author)

Rochester Institute of Technology ( email )

Saunders College of Business
105 Lomb Memorial Drive
Rochester, NY 14623-5608
United States

Susan Sorensen

University of Houston, Clear Lake ( email )

2700 Bay Area Blvd. Box 42
Houston, TX 77058
United States

Li Sun

University of Tulsa ( email )

600 South College
Tulsa, OK 74104
United States

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