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| Author: | Duchin, R. Matsusaka, J. G. Ozbas, O. |
| Title: | When are outside directors effective? |
| Journal: | Journal of Financial Economics
2010 : MAY, VOL 96:2, p. 195-214 |
| Index terms: | corporate governance asymmetric information company performance board of directors |
| Language: | eng |
| Abstract: | Recent regulations have required companies to include more outside directors in their boards. This article aims to study how board independence affects the firm performance. The results reveal that the cost of acquiring information about the company influences the effectiveness of outside directors. High costs lead to negative impact of outside directors on firm performance, whereas low costs lead to positive outcomes. The study proves that board independence does affect performance, and that information asymmetry has an effect on the effectiveness of outside directors. With the current regulations, the findings indicate that in order to improve firm performance, companies should make the information about the company better available for outside directors. |
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