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The effect of board independence on firm performance - new evidence from product market conditions

Hu, Xiaoyuan, Lin, Danmo and Tosun, Onur Kemal ORCID: 2023. The effect of board independence on firm performance - new evidence from product market conditions. European Journal of Finance 29 (4) , pp. 363-392. 10.1080/1351847X.2022.2049448

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We study the effect of corporate board independence on firm performance under different product market conditions. Using customer–supplier links to identify exogenous downstream demand shocks, we find that firm performance is positively associated with board independence when the firm-specific product demand drops. The results are stronger for smaller firms and firms with high growth and more volatile stock returns. The findings prevail if the firm faces a medium level of product market competition or a medium level of downstream demand shock. We provide suggestive evidence for the board's monitoring function driving the effectiveness of board independence in bad times of idiosyncratic risks, rather than its advisory function.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Routledge
ISSN: 1351-847X
Date of First Compliant Deposit: 1 May 2022
Date of Acceptance: 21 February 2022
Last Modified: 12 Nov 2023 09:28

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