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Title Corporate Governance and the Design of Board of Directors
Publication Date
University/Publisher University of Gothenburg / Göteborgs Universitet
Abstract Paper 1: “The Effects of Board Independence on Busy Directors and Firm Value: Evidence from Regulatory Changes in Sweden.” I use an exogenous change to the rules of corporate governance for Swedish firms in 2005 to identify the causal effects of changes in board structure on firm value. The new rules require there to be at least 50 percent independent directors on the boards of large firms. This offers a quasi-experimental setting where I test for the effects of changes to board independence on the market valuation of firms measured by Tobin’s Q. In order to identify the effects of this shock, and alleviate endogeneity issues inherent to corporate governance studies, I use a regression discontinuity design to capture the reaction of the market to the new governance rules, taking advantage of the fact that only large firms are required to comply with the code. The results indicate that (a) the market reacts negatively to the enactment of the new governance rules, and (b) target firms that complied with the independence requirement have a lower Tobin’s Q than non-target firms. I further investigate potential causes behind the estimated negative effect by looking at the busyness of independent directors. The code imposes an increase in the number of independent directors but does not restrict the number of outside directorships they can hold. Thus, an increase in board independence can lead to an increase in board busyness, which can explain the negative reaction from the market. Results indicate that in reaction to the code, target firms have more busy independent directors than non-target firms, and this effect is stronger for target firms that complied with the independence requirement. Key words: Board independence, independent directors, busy directors, corporate governance, Sweden JEL classification: G32, G34, G38 Paper 2:“The Value of a Directorship in the Eyes of Busy Directors.” I study the effects of directors' reputation incentives on their commitment to board duties and assess their impact on the market valuation of firms in Sweden. Using social network theory, I measure the reputation of boards and directors based on their centrality in their respective networks. The more central a firm is relative to other firms in the network, the more reputation incentives it supplies to its directors. First, I look at how the relative reputation of firms can affect directors' commitment of time and effort. I find that the probability for outside directors to miss board meetings in firms they consider more prestigious is lower than that for directors who consider those firms less prestigious. Second, I aggregate the reputational incentives of directors to the board level, which allows me to measure how directors value their directorships differently. Accordingly, I find that firms with a higher proportion of independent directors who consider them more prestigious witness a significantly better firm valuation than firms with more directors considering them less prestigious. Third, I study the effect of appointing…
Subjects/Keywords Corporate Governance
Language en
Country of Publication se
Record ID handle:2077/40187
Other Identifiers 978-91-88199-03-4 (tryckt); 978-91-88199-04-01 (PDF)
Repository goteborg
Date Retrieved
Date Indexed 2018-01-11

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