The Advisory and Monitoring Roles of the Board - Evidence from Disruptive Events

51 Pages Posted: 23 Apr 2020 Last revised: 29 May 2020

See all articles by Ettore Croci

Ettore Croci

Catholic University of the Sacred Heart of Milan

Gerard Hertig

ETH Zurich; European Corporate Governance Institute (ECGI)

Layla Khoja

ETH Zurich, Department of Humanities, Social and Political Sciences, Department of Management, Technology and Economics, Students

Luh Luh Lan

National University of Singapore (NUS) - Faculty of Law; National University of Singapore - Department of Strategy & Policy; European Corporate Governance Institute (ECGI)

Date Written: April 21, 2020

Abstract

We study the contribution of directors to firm resilience by assessing the relative importance of their advisory and monitoring roles at times of crisis. Based on manually collected US data, we document that four bord-related variables affect market reactions around disruptive events. Board independence and the presence of directors with industry expertise exacerbate the negative share price effect, whereas the converse is true for director busyness and board size. These reactions imply that, in times of crisis, advice-oriented boards fare better than monitoring-oriented boards.

Keywords: Disruptive events, corporate governance, board of directors

JEL Classification: G32, G34

Suggested Citation

Croci, Ettore and Hertig, Gerard and Khoja, Layla and Lan, Luh Luh, The Advisory and Monitoring Roles of the Board - Evidence from Disruptive Events (April 21, 2020). European Corporate Governance Institute – Finance Working Paper No. 673/2020, Available at SSRN: https://ssrn.com/abstract=3581712 or http://dx.doi.org/10.2139/ssrn.3581712

Ettore Croci (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Gerard Hertig

ETH Zurich ( email )

IFW E 49
Haldeneggsteig 4
CH-8092 Zurich
Switzerland
+4144-632-4008 (Phone)
+4144-632-1097 (Fax)

HOME PAGE: http://www.hertig.ethz.ch

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
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1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Layla Khoja

ETH Zurich, Department of Humanities, Social and Political Sciences, Department of Management, Technology and Economics, Students ( email )

Zürich
Switzerland

Luh Luh Lan

National University of Singapore (NUS) - Faculty of Law ( email )

469G Bukit Timah Road
Eu Tong Sen Building
Singapore, 259776
Singapore

National University of Singapore - Department of Strategy & Policy ( email )

15 Kent Ridge Drive, Singapore
Singapore 119245
Singapore

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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