How do independent directors influence innovation productivity? A quasi-natural experiment

Pornsit Jiraporn, Sang Mook Lee, Kuen Jae Park and HakJoon Song

Applied Economics Letters, 2018, vol. 25, issue 7, 435-441

Abstract: Due to managerial myopia, managers may be reluctant to make long-term investment decisions that do not produce immediate results. Effective corporate governance can align managers’ short-term-oriented incentives with shareholders’ long-term interests. Because the board of directors is the paramount governance mechanism, we explore the role of board governance on managerial myopia. In particular, we investigate the effect of independent directors on corporate innovation. To minimize endogeneity, we exploit the passage of the Sarbanes–Oxley Act as an exogenous shock that raises board independence. Our difference-in-difference estimates show that board independence leads to significantly higher investments in innovation as well as higher innovation productivity. Our results are consequential as they show that board governance has a palpable effect on important corporate outcomes such as innovation productivity.

Date: 2018
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.1080/13504851.2017.1329927 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apeclt:v:25:y:2018:i:7:p:435-441

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAEL20

DOI: 10.1080/13504851.2017.1329927

Access Statistics for this article

Applied Economics Letters is currently edited by Anita Phillips

More articles in Applied Economics Letters from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().