Powerful Independent Directors

Kathy Fogel, Liping Ma and Randall Morck

No 19809, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Shareholder valuations are economically and statistically positively correlated with independent director power, gauged by a composite of social network power centrality measures. Powerful independent directors’ sudden deaths reduce shareholder value significantly; other independent directors’ deaths do not, consistent with powerful independent directors increasing firm valuations. Further tests associate more powerful independent directors with less value-destroying M&A, less free cash flow retention, more CEO accountability, and less earnings management. We interpret these findings as more powerful independent directors better detecting and countering CEO missteps because of better access to information, greater credibility in challenging errant top managers, or both.

JEL-codes: D85 G02 G3 G34 G38 K22 L2 Z13 (search for similar items in EconPapers)
Date: 2014-01
New Economics Papers: this item is included in nep-cdm, nep-cfn, nep-hrm and nep-law
Note: CF
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published as Kathy Fogel & Liping Ma & Randall Morck, 2021. "Powerful independent directors," Financial Management, vol 50(4), pages 935-983.

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