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Governance and Politics: Regulating Independence and Diversity in the Board Room
Author(s) -
Bøhren ØYvind,
Strøm R. Øystein
Publication year - 2010
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/j.1468-5957.2010.02222.x
Subject(s) - corporate governance , independence (probability theory) , diversity (politics) , politics , gender diversity , value (mathematics) , accounting , business , enterprise value , on board , political science , finance , law , engineering , statistics , mathematics , machine learning , computer science , aerospace engineering
This paper analyzes the economic rationale for board regulation in place and for introducing new regulation in the future. We relate the value of the firm to the use of employee directors, board independence, directors with multiple seats, and to gender diversity. Our evidence shows that the firm creates more value for its owners when the board has no employee directors, when its directors have strong links to other boards, and when gender diversity is low. We find no relationship between firm performance and board independence. These characteristics of value‐creating boards support neither popular opinion nor the current politics of corporate governance.