Do corporate boards affect firm performance? New evidence from the financial crisis

Arbeitspapier

This study uses the current financial crisis as a quasi-experiment to examine whether and to what extent corporate boards affect the performance of firms. Using cumulative stock returns over the crisis to measure of firm performance, we find that board independence, as traditionally defined, does not significantly affect firm performance. However, when we re-define independent directors as outside directors who are less connected with current CEOs, a measure we call true independence, there is a positive and significant relationship between this measure and firm performance. Second, outside financial experts are important for firm performance. Third, board meeting frequencies, director attendance behaviors, and director age also affect firm performance during the crisis. Overall, our results suggest that firm performance during a crisis is a function of firm-level differences in corporate boards.

Object Details

• ISBN: 978-952-462-796-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Bank of Finland Research Discussion Papers ; No. 11/2012

Classification and Topics

• Classification: Wirtschaft ; Financial Crises ; Corporate Finance and Governance: General ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
• Subject: Financial crisis ; Boards of directors ; Firm performance ; True independence

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Francis, Bill ; Hasan, Iftekhar ; Wu, Qiang
• Event: Veröffentlichung
• (who): Bank of Finland
• (where): Helsinki
• (when): 2012

Further information

• Handle: http://hdl.handle.net/10419/212214
• Last update: 10.03.2025, 11:45 AM CET