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Investigating the Relationship Between Board Characteristics and Board Information
Author(s) -
Rutherford Matthew A.,
Buchholtz Ann K.
Publication year - 2007
Publication title -
corporate governance: an international review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.866
H-Index - 85
eISSN - 1467-8683
pISSN - 0964-8410
DOI - 10.1111/j.1467-8683.2007.00589.x
Subject(s) - tying , corporate governance , business , accounting , principal–agent problem , information asymmetry , agency (philosophy) , information quality , public relations , information system , political science , economics , finance , sociology , social science , law , microeconomics
While corporate governance research has had some success tying boards' demographic characteristics to relatively distant outcomes such as CEO pay and succession, numerous studies have indicated that a major weakness of this research is that it has largely ignored the intervening behaviours associated with board vigilance. This study begins to answer this call by examining the relationship between boards' demographic characteristics and boards' information‐gathering behaviour. Using primary and secondary data from 149 firms, this study finds that an increase in the proportion of outside directors on a board is associated with an increase in boards' information quality and proactive information‐seeking. In addition, an increase in outside director tenure is associated with boards exchanging information more frequently. Consistent with agency theory predictions, these findings suggest that vigilant boards are likely to take actions aimed at reducing the level of information asymmetry between them and their CEOs.