Are all non-independent non-executive directors undesirable? Directors non-independence and firm value in UK
While prior studies treat non-executives as a homogenous group, this paper focuses on heterogeneity of this group. It examines the link between firm value and the specific characteristics of non-executives that render them non-independent (and by implication undesirable) as per the UK Code of Corporate Governance. It finds that contrary to the Code’s implications, the presence of past employees on the board, has an economically as well as statistically strong positive association with firm value. This result suggests that it is not just formal ‘independence’, but a combination of ‘independence of mind’ and ‘firmspecific’ knowledge that perhaps past employees best possess, that matters for enhancing effective board decision making and hence firm value. Moreover, only some of the other dimensions of directors’ non-independence are negatively associated with firm value. The results suggest that some of the Code recommendations regarding directors’ independence may actually not benefit shareholders.
Conference paper; submitted for publication as journal article
Showing items related by title, author, creator and subject.
Liu, Xingzhou (University of ExeterDepartment of Finance, 2013-10-15)The topic of insider/director trading raises interesting questions and has generated much attention from researchers, market participants and regulators. The purpose of this thesis is to investigate the long-run director ...
Stock market patterns around directors’ trades: effects of director category and gender on market timing Gregory, Alan; Tharyan, Rajesh; Tonks, Ian (University of Exeter Business School, 2009-07)We examine whether directors of UK companies can time the market when they trade in their own-company stock, using a comprehensive dataset on all directors’ trades from 1994-2006 for FTSE All Share companies and AIM-listed ...
El-Sayed, Nader Mahmoud (University of ExeterAccounting, 2013-07-10)Issues as to the suitability of executive compensation packages have obtained an ever increasing profile in recent years. Whilst there has been quite extensive empirical investigation of pay-performance sensitivity, the ...