Do independent directors cause improvements in firm transparency?

Christopher S. Armstrong, John E. Core and Wayne R. Guay

Journal of Financial Economics, 2014, vol. 113, issue 3, 383-403

Abstract: Although recent research documents a positive relation between corporate transparency and the proportion of independent directors, the direction of causality is unclear. We examine a regulatory shock that substantially increased board independence for some firms, and find that information asymmetry, and to some extent management disclosure and financial intermediation, changed at firms affected by this shock. We also examine whether these effects vary as a function of management entrenchment, information processing costs, and required changes to audit committee independence. Our results suggest that firms can alter their corporate transparency to suit the informational demands of a particular board structure.

Keywords: Corporate governance; Board of directors; Corporate transparency; Information asymmetry; Board regulations (search for similar items in EconPapers)
JEL-codes: G34 G38 K22 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (132)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:113:y:2014:i:3:p:383-403

DOI: 10.1016/j.jfineco.2014.05.009

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