We find product market competition makes independent directors more productive in enhancing firm value. When competition is strong, management is more active with new business initiatives/proposals which require board approval, leading to more frequent board meetings. Greater interaction with management provides independent directors with more opportunity to offer valuable advice and information necessary to monitor effectively. To identify these empirical regularities, we focus on a unique independent director characteristic – CEO experience in a closely related industry (same three-digit SIC). Independent directors with such experience are rare, but they have a powerful impact on enhancing firm valuation when competition is strong. When competition is weak, however, we do not observe the positive impact. The results are robust to IV regression estimates and to a battery of other robustness tests.
Keywords: Product Market Competition, Independent Directors’ Experience, Board Advising and Monitoring, Corporate Governance
JEL classification: G34, G38, K22
학회소식
[2012년 제 4차] Does Competition Enhance Independent Director Produ
작성자 : 관리자
조회수 : 1119
게시일 :
2012-12-12
