The Changing Dynamics of Board Independence: A Copula Based Quantile Regression Approach

Jong-Min Kim, Chanho Cho, Chulhee Jun and Won Yong Kim
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Jong-Min Kim: Statistics Discipline, Division of Science and Mathematics, University of Minnesota-Morris, Morris, MN 56267, USA
Chanho Cho: School of Business and Natural Science, Black Hills State University, Spearfish, SD 57783, USA
Chulhee Jun: Department of Finance, Bloomsburg University of Pennsylvania, Bloomsburg, PA 17815, USA
Won Yong Kim: Department of Business Administration, Augsburg University, Minneapolis, MN 55454, USA

JRFM, 2020, vol. 13, issue 11, 1-21

Abstract: This paper examines the effect of board characteristics, especially board independence, on firm performance from a dynamic perspective through copula-based quantile regression approaches, which allow us to focus on changes at different points in the distribution of board characteristics. We find that the effect of board independence on Tobin’s Q, a proxy of firm value, is negatively associated with firm value, using ordinary least squares (OLS) regression. This negative effect using the conditional mean of the firm value does not hold across the conditional quantiles of the distribution of Tobin’s Q, and this finding is still held under both the linear and the nonlinear quantile regressions. We even lessen the assumption of distributions of multivariate board variables by employing parametric copula-based quantile regressions as well as nonparametric ones. The results support our findings. Our results suggest that estimating the quantile effect of board variables on firm value can provide more meaningful insight than just examining the conditional mean effect.

Keywords: causal inference; board structure; corporate governance; linear quantile regression; copula based quantile regression (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2020
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