Using information on business, professional and social ties of directors, we examine how board independence and lack of independence affect firm value. Independent outsiders improve firm value on average while friendly outsiders have negative impact. Independent boards as monitor perform better in large firms with less-information asymmetry and high transparency. However, friendly boards increase firm value more than independent boards when facing financial volatility and M&A threats. Furthermore, politically connected friendly outsiders have more positive impacts on the domestic companies. Our results suggest that the effectiveness of boards’ multiple roles as monitor, advisor, and facilitator depends on their independence and corporate environments.
Keywords:, Outside directors, Board independence, Friendly boards, Firm value, Market microstructure, Information asymmetry, Social ties, Monitoring, Political connection
학회소식
학회소식
[2011년 제 2차] A Friend in Need is a Friend Indeed
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2011-06-03