재무연구 제 권 호 (2011년 5월)
Asian Review of Financial Research, Vol., No..
pp.476~520
pp.476~520
A friend in need is a friend indeed.
Sung Wook Joh College of Business Administration Seoul National University, Korea
Jin-Young Jung College of Business Administration Seoul National University, Korea
Using information on business, professional and social ties of directors, we examine how board independence and lack of independence affect firm value. Independent outsiders improve firm value on average while friendly outsiders have negative impact. Independent boards as monitor perform better in large firms with less-information asymmetry and high transparency. However, friendly boards increase firm value more than independent boards when facing financial volatility and M&A threats. Furthermore, politically connected friendly outsiders have more positive impacts on the domestic companies. Our results suggest that the effectiveness of boards’ multiple roles as monitor, advisor, and facilitator depends on their independence and corporate environments.
Sung Wook Joh
Jin-Young Jung
Using information on business, professional and social ties of directors, we examine how board independence and lack of independence affect firm value. Independent outsiders improve firm value on average while friendly outsiders have negative impact. Independent boards as monitor perform better in large firms with less-information asymmetry and high transparency. However, friendly boards increase firm value more than independent boards when facing financial volatility and M&A threats. Furthermore, politically connected friendly outsiders have more positive impacts on the domestic companies. Our results suggest that the effectiveness of boards’ multiple roles as monitor, advisor, and facilitator depends on their independence and corporate environments.
