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

Bill Francis, Iftekhar Hasan and Qiang Wu

No 11/2012, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: 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.

Keywords: Financial crisis; Boards of directors; Firm performance; True independence (search for similar items in EconPapers)
JEL-codes: G01 G30 G34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2012_011

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