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
Date Written: March 15, 2018
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: Suggested Citation