Board Independence and Product Market Competition in Swedish Firms

Randøy, Trond; Jenssen, Jan Inge

doi:10.1111/j.1467-8683.2004.00369.x

Cited by 56 publications

(38 citation statements)

References 63 publications

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“…Finally, the negative market response to board independence that I document in the present study differs from findings in previous studies of board independence in Sweden. For instance, both Palmberg () and Randøy and Jenssen () find a positive correlation between board independence firm value and performance in Swedish firms. My paper expands the literature on Swedish boards by identifying board busyness as an important factor in evaluating the effect of board independence on firm value.…”

Section: Introductionmentioning

confidence: 99%

“…Finally, the negative market response to board independence that I document in the present study differs from findings in previous studies of board independence in Sweden. For instance, both Palmberg (2015) and Randøy and Jenssen (2004) The rest of the paper is organized as follows. Section 2 gives a review of the board independence literature.…”

Section: Introductionmentioning

confidence: 99%

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The effects of board independence on busy directors and firm value: Evidence from regulatory changes in Sweden

Moursli

2019

Corporate Governance

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Research Question/Issue This paper examines the impact of changes in board independence on the market valuation of Swedish firms. I exploit an exogenous change to the rules of corporate governance in 2005, which requires large firms to have majority independent boards, as a quasi‐experimental setting. Research Findings/Insights I use a regression discontinuity design and a difference‐in‐differences approach 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 witnessed larger decreases in their market valuation compared with the rest of the firms in the sample. The busyness of independent directors is a potential explanation for the estimated negative effect of the increased board independence on the market valuation of target firms. For instance, I find that independent directors in target firms experienced a larger increase in their busyness compared with their peers in nontarget firms. This increase in busyness is also more pronounced for independent directors of complying target firms. Theoretical/Academic Implications The findings of this paper are in line with theoretical models that find that imposing quotas on the number of independent directors might not be optimal for all firms. Practitioner/Policy Implications This paper identifies board busyness as an important consequence of requiring board independence in the Swedish context. The results of the paper have implications for corporate governance policies that impose quotas on board independence without limiting board busyness, especially when the supply of directors is limited.

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Section: Introductionmentioning

confidence: 99%

“…Finally, the negative market response to board independence that I document in the present study differs from findings in previous studies of board independence in Sweden. For instance, both Palmberg (2015) and Randøy and Jenssen (2004) The rest of the paper is organized as follows. Section 2 gives a review of the board independence literature.…”

Section: Introductionmentioning

confidence: 99%

The effects of board independence on busy directors and firm value: Evidence from regulatory changes in Sweden

Moursli

2019

Corporate Governance

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“…For instance, it is argued that too much monitoring, which is normally associated with more outside directors, could reduce shareholder value (Adams and Ferreira, 2007;Randøy and Jenssen, 2004). Boards could monitor to the extent that management would fail to make some key decisions, which could enhance shareholder value.…”

Section: Outside Directorsmentioning

confidence: 98%

Board Composition and Company Performance: A Study of Sub-Saharan African Countries

Munisi¹

2014

Corporate Governance and Corporate Social Responsibility

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In this chapter, we examine the association between board composition and company performance in public companies across Sub-Saharan Africa. By focusing on Sub-Saharan Africa, we extend research on the relationship between board composition and company performance to the countries characterized by weak institutions. Specifically, we examine the impact of specific board composition characteristics, such as foreign directors, outside directors and board size on company performance. We measure company performance by accounting and stock performance. We found that the ratio of foreign directors is negatively associated with accounting performance. The findings indicate a curvilinear association between outside directors and performance. We did not find a significant association between board size and company performance. Furthermore, we found no significant association between board composition and stock performance. This study provides useful insights into the impact of the characteristics of board composition on company performance in Sub-Saharan African countries.

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“…Lack of speed will reduce the board's capacity to engage fully in decision making. The board will certainly not avoid monitoring, but they will not put an emphasis on monitoring, especially not when fast market change involve high levels of competition since monitoring and competition are substitutes, and too much emphasis on monitoring will alienate top managers (Randøy & Jenssen, 2004). Thus, overall a de-emphasis on monitoring and decision making.…”

Section: Environmental Uncertaintymentioning

confidence: 99%

The boards functional emphasis - a contingency approach

Collin¹

2008

COC

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The understanding of the board and its behaviour is limited, in spite of the board's tremendous societal importance. We present a contingency approach on the boards functional emphasis, in which a fourth function of the board is consider, that of conflict resolution or principal identification. The approach contrast with main stream board research through making the assumption that the firm is a nexus of investments, thus avoiding the empirical assumption that the shareholder is the sole principal, through considering duty as an incentive for action, through considering the board of a corporation and not restrict it to a set of empirical boards. Praxis implications concerning the management of functional disharmony finalise the paper.

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Board Independence and Product Market Competition in Swedish Firms

Cited by 56 publications

References 63 publications

The effects of board independence on busy directors and firm value: Evidence from regulatory changes in Sweden

The effects of board independence on busy directors and firm value: Evidence from regulatory changes in Sweden

Board Composition and Company Performance: A Study of Sub-Saharan African Countries

The boards functional emphasis - a contingency approach

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