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Director Ownership, Governance, and Performance

Published online by Cambridge University Press:  01 February 2013

Sanjai Bhagat
Affiliation:, Leeds School of Business, University of Colorado at Boulder, UCB 419, Boulder, CO 80309;
Brian Bolton
Affiliation:, School of Business Administration, Portland State University, PO Box 751, Portland, OR 97207.


We study the impact of the Sarbanes-Oxley Act on the relationship between corporate governance and company performance. We consider 5 measures of corporate governance during the period 1998–2007. We find a significant negative relationship between board independence and operating performance during the pre-2002 period, but a positive and significant relationship during the post-2002 period. Our most important contribution is a proposal of a governance measure, namely, dollar ownership of the board members, that is simple, intuitive, less prone to measurement error, and not subject to the problem of weighting a multitude of governance provisions in constructing a governance index.

Research Articles
Copyright © Michael G. Foster School of Business, University of Washington 2013 

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