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

See all articles by Fernando Lefort

Fernando Lefort

Universidad Diego Portales - Facultad de Economía y Empresa

Francisco Urzúa I.

City University London - Bayes Business School

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

Lefort, Fernando and Urzua, Francisco, Board Independence, Firm Performance and Ownership Concentration: Evidence from Chile (March 23, 2007). Journal of Business Research, 2008, Available at SSRN: https://ssrn.com/abstract=1664074

Fernando Lefort

Universidad Diego Portales - Facultad de Economía y Empresa ( email )

Manuel Rodriguez Sur 253
Santiago
Chile

Francisco Urzua (Contact Author)

City University London - Bayes Business School ( email )

United Kingdom

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