Who are better monitors? Comparing styles of supervisory and independent directors

Di Lu, Guanchun Liu and Yuanyuan Liu

International Review of Financial Analysis, 2022, vol. 83, issue C

Abstract: This paper compares the unobservable style effect between independent directors and supervisory directors on firm performance. Utilizing the unique Chinese board system with both independent and supervisory directors and a large panel data of 2,240 public firms from 2003 to 2017, this paper finds that both supervisory and independent style is crucial in determining variations of firm performance. The effects of both independent and supervisory director style are less significant when the “type II” agency problem is more severe in a firm. Moreover, outside independent director style is more effective when information costs are low or when firms need more outside resources, while inside supervisor director style is more effective when there are no major internal changes. Finally, the results also suggest that increasing qualified supervisor representations are beneficial to firms.

Keywords: Board independence; Director fixed effects; Firm performance (search for similar items in EconPapers)
JEL-codes: G34 J44 L25 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:83:y:2022:i:c:s1057521922002599

DOI: 10.1016/j.irfa.2022.102305

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