Board Independence, Firm Performance and Ownership Concentration: Evidence from Chile
Journal of Business Research, 2008
24 Pages Posted: 23 Aug 2010 Last revised: 26 Aug 2010
Date Written: March 23, 2007
Abstract
What determines the composition of companies’ boards in the context of high ownership concentration? Are independent directors important as an internal governance mechanism in companies with high ownership concentration? Do markets favor companies whose controlling shareholders use voting rights to elect professional directors?
Using a four-year, 160-company panel data, and controlling for endogeneity, this paper addresses these three related questions, finding that an increase in the proportion of outside directors affects company value. The paper also finds that companies that present more exacerbated agency conflicts tend to incorporate professional directors to the boards, in an effort to improve corporate governance and ameliorate the agency problem.
Keywords: Boards, Corporate governance, Ownership structure, Emerging economies, Chile
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
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