Board Structure and Role of Outside Directors in Private Firms

47 Pages Posted: 19 May 2020

See all articles by Huasheng Gao

Huasheng Gao

Fanhai International School of Finance, Fudan University

Zhongda He

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development

Multiple version iconThere are 2 versions of this paper

Date Written: September 2019

Abstract

We examine the board composition and the role of outside directors in US private firms. We find that compared with public firms, private firms have a higher proportion of outside directors on the boards and select their outside directors in a more responsive way to their advisory and monitoring needs. We also find that private firms’ CEO turnover–performance sensitivity, earnings quality, going‐public likelihood, and IPO value increase with the proportion of outside directors. These results are consistent with the view that lack of external governance in private firms leads to a greater demand for board monitoring for private firms.

Keywords: advisory role, earnings quality, external governance, information environment, monitoring role, outside director, private firms, public firms

Suggested Citation

Gao, Huasheng and He, Zhongda, Board Structure and Role of Outside Directors in Private Firms (September 2019). European Financial Management, Vol. 25, Issue 4, pp. 861-907, 2019, Available at SSRN: https://ssrn.com/abstract=3600266 or http://dx.doi.org/10.1111/eufm.12191

Huasheng Gao (Contact Author)

Fanhai International School of Finance, Fudan University ( email )

Beijing West District Baiyun Load 10th
Shanghai, 100045
China
2165642222 (Phone)
2165642222 (Fax)

Zhongda He

Central University of Finance and Economics (CUFE) - Chinese Academy of Finance and Development ( email )

Room 807, Academic Hall
39 South College Road, CUFE
Beijing, Beijing 100081
China
86-10-62289266 (Phone)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
0
Abstract Views
355
PlumX Metrics