The Value of Academic Independent Directors

55 Pages Posted: 1 Jan 2020 Last revised: 29 Oct 2020

See all articles by Bibo Liu

Bibo Liu

Tsinghua University - PBC School of Finance

Xuan Tian

Tsinghua University - PBC School of Finance

Wei Wei

Tsinghua University, PBC School of Finance, Students

Zhen Zhou

Tsinghua University - PBC School of Finance

Date Written: October 11, 2020

Abstract

This paper investigates the value of academic independent directors (ADs) by exploring an unexpected policy shock that forces ADs to resign from Chinese listed firms. Around the announcement of the policy, stock prices of firms with ADs drop by 2.2%, which translates to a loss of 135M RMB (around $19.3M). ADs with backgrounds that are related to the firms’ primary line of business, with connections to industry associations, and who hold top positions in prestigious universities are more valuable to firms. ADs with business backgrounds are more valuable when they serve on particular board subcommittees. Moreover, ADs miss fewer board meetings. In the long run, firm fundamentals and independent directors’ monitoring and advising efficiency deteriorate significantly after ADs resign. Our paper sheds new light on the value of independent directors.

Keywords: Firm value, Academic independent director, Firm fundamentals

JEL Classification: G34, G38

Suggested Citation

Liu, Bibo and Tian, Xuan and Wei, Wei and Zhou, Zhen, The Value of Academic Independent Directors (October 11, 2020). PBCSF-NIFR Research Paper, Available at SSRN: https://ssrn.com/abstract=3504140 or http://dx.doi.org/10.2139/ssrn.3504140

Bibo Liu (Contact Author)

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

Xuan Tian

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengfu Road
Haidian District
Beijing 100083
China
+86-10-62794103 (Phone)

HOME PAGE: http://xuantian.info/

Wei Wei

Tsinghua University, PBC School of Finance, Students ( email )

No. 43, Chengdu Road
Beijing 100083
China

Zhen Zhou

Tsinghua University - PBC School of Finance ( email )

No. 43, Chengdu Road
Haidian District
Beijing 100083
China

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