Who Cares About Director Independence?

73 Pages Posted: 27 Mar 2007

See all articles by Paolo Santella

Paolo Santella

Single Resolution Board

Carlo Drago

University of Rome "Niccolò Cusano"

Giulia Paone

Dartmouth College - Tuck School of Business

Date Written: March 2007

Abstract

In this article we have expanded the analysis of the new dataset we created in Santella, Paone, Drago (2005) which analysed and quantified corporate disclosure on directors formally identified as independent by the forty Italian Blue Chips. We find here a general low level of compliance with independence requirements for both financial and non-financial companies, particularly with regard to the two key independence criteria of not having too many concurring commitments and not having business relationships with the company or an associated company. We also find that financial companies show a lower level of compliance than non-financial ones and are connected with each other and with a few non-financial companies through networks of cross-directorships: two directors (one independent and one executive) who also sit at the same time on another company board. Finally, those non-financial companies that have a relatively fragmented shareholder structure tend to be characterised by higher levels of compliance and disclosure (but not always by lower levels of not compliance) than tightly-controlled non-financial companies, presumably because of sensitivity to a larger pool of small shareholders. Peculiarly, financial companies with fragmented shareholder structure tend to be characterised by low disclosure levels, although such companies are also subject to strong financial supervision.

Keywords: corporate governance, independent directors, interlocking directorships, empirical legal studies

JEL Classification: G3, K, K2, K22

Suggested Citation

Santella, Paolo and Drago, Carlo and Paone, Giulia, Who Cares About Director Independence? (March 2007). Available at SSRN: https://ssrn.com/abstract=971189 or http://dx.doi.org/10.2139/ssrn.971189

Paolo Santella (Contact Author)

Single Resolution Board

Rue de la Science 27
Bruxelles, 1000
Belgium

Carlo Drago

University of Rome "Niccolò Cusano" ( email )

Via Don Carlo Gnocchi, 3
Rome, 00166
Italy

Giulia Paone

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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