How valuable are independent directors? Evidence from external distractions

A-Tier
Journal: Journal of Financial Economics
Year: 2019
Volume: 132
Issue: 3
Pages: 226-256

Authors (2)

Masulis, Ronald W. (UNSW Sydney) Zhang, Emma Jincheng (not in RePEc)

Score contribution per author:

2.011 = (α=2.01 / 2 authors) × 2.0x A-tier

α: calibrated so average coauthorship-adjusted count equals average raw count

Abstract

We provide new evidence on the value of independent directors by exploiting exogenous events that seriously distract independent directors. Approximately 20% of independent directors are significantly distracted in a typical year. They attend fewer meetings, trade less frequently in the firm's stock, and resign from the board more frequently, indicating declining firm-specific knowledge and a reduced board commitment. Firms with more preoccupied independent directors have declining firm valuation and operating performance and exhibit weaker merger and acquisition (M&A) profitability and accounting quality. These effects are stronger when distracted independent directors play key board monitoring roles and when firms require greater director attention.

Technical Details

RePEc Handle
repec:eee:jfinec:v:132:y:2019:i:3:p:226-256
Journal Field
Finance
Author Count
2
Added to Database
2026-01-25