Board Independence and Product Market Competition in Swedish Firms

Trond Randøy and Jan Inge Jenssen

Corporate Governance: An International Review, 2004, vol. 12, issue 3, 281-289

Abstract: This study suggests that firms in highly competitive industries should have fewer outside board members, whereas companies operating in less competitive industries should have more outside directors. Specifically, we argue that board independence is less relevant or even redundant in highly competitive industries, where the firm is already “monitored” by a competitive product market. Using publicly traded Swedish firms for empirical testing, this study finds that board independence reduces firm performance in industries with highly competitive product markets. On the other hand, board independence enhances firm performance among companies facing less competitive product markets.

Date: 2004
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