Does Board Composition Matter to Institutional Investors?
Shashank Bansal and
Journal of Emerging Market Finance, 2019, vol. 18, issue 2_suppl, S238-S266
This study examines the resource dependency and signalling role of independent directors from the perspective of institutional investorâ€™s and also investigates if the presence of large blockholder moderates the signalling effect. This study uses the quasi-natural experiment to examine this relationship. The difference-in-difference (DiD) analysis of 5,298 firm observations covering 618 National Stock Exchange (NSE) listed Indian firms for the period 2001â€“2011 provides empirical evidence that board composition does matter to institutional investors. We find that non-compliant firms who adopted the board independence requirement experience a significant increase in institutional ownership relative to previously compliant firms. We also find that institutional investors have invested more in family-owned firms during post-mandate period compared to government-, private- and foreign-owned firms. Overall, this study contributes to the existing literature on resource dependency theory and signalling theory and shows that the board independence acts as a signal to institutional investors and decreases the agency cost and cost of monitoring. JEL Codes: G3, G11, G34, G38, G23
Keywords: Board composition; independent directors; institutional investors; corporate governance; signalling theory; resource dependency theory (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:sae:emffin:v:18:y:2019:i:2_suppl:p:s238-s266
Access Statistics for this article
More articles in Journal of Emerging Market Finance from Institute for Financial Management and Research
Bibliographic data for series maintained by SAGE Publications ().