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Does Board Independence Increase Firm Value? Evidence from Closed-End Funds

Published online by Cambridge University Press:  21 May 2020

Matthew E. Souther Open the ORCID record for Matthew E. Souther [Opens in a new window]
Matthew E. Souther*
Affiliation:
Souther, matthew.souther@moore.sc.edu, University of South Carolina Moore School of Business
*
Souther, matthew.souther@moore.sc.edu
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Abstract

Researchers disagree about the impact of board independence on firm value. The disagreement generally stems from the endogenous nature of board appointments. I add new evidence to this discussion by using a sample of closed-end funds to document the value-enhancing effects of independent boards. Using cross-sectional, difference-in-differences, and instrumental variables techniques, I address these endogeneity concerns and find consistent evidence that board independence is associated with higher firm value.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 56 , Issue 1 , February 2021 , pp. 313 - 336
Copyright
© Michael G. Foster School of Business, University of Washington 2019

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Footnotes

This paper benefited from feedback provided by Ryan Flugum, Rachel Gordon, John Howe, Jeffrey Pontiff (the referee), Tina Yang, Adam Yore, and participants of the 2017 Financial Management Association meeting. I am also grateful for research support from both the University of Florida and the University of Missouri, where portions of this project were completed.

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