Does Board Independence Increase Firm Value? Evidence from Closed-End Funds
Forthcoming, Journal of Financial and Quantitative Analysis
40 Pages Posted: 25 Sep 2019
Date Written: August 15, 2019
Previous literature disagrees on the impact of board independence on firm value. The disagreement generally stems from the endogenous nature of board appointments. I add new evidence to this discussion by using a sample of closed-end funds to document the value-enhancing effects of independent boards. Using cross-sectional, difference-in-difference, and instrumental variable techniques, I address these endogeneity concerns and find consistent evidence that board independence is associated with higher firm value.
Keywords: Board independence, Boards of directors, Closed-end funds
JEL Classification: G30, G34, G39
Suggested Citation: Suggested Citation