Board of Directors Independence and Firm Value: Empirical Evidence Based on the Bucharest Stock Exchange Listed Companies

Year 2013, Volume: 3 Issue: 4, 885 - 900, 01.12.2013

Georgeta Vintila Stefan Cristian Gherghina

https://izlik.org/JA92YT38HM

Abstract

This paper examines the influence and causal relationship between board of directors independence, CEO duality, and firm value. By estimating multivariate regression models for panel data, unbalanced, for a sample of companies listed on the Bucharest Stock Exchange, there resulted a positive influence of the percentage of independent directors on firm value, but down to a threshold of their representation of 47.23 percent, whereupon their influence becomes negative. When we employed fixed-effects models, the relationship previously mentioned was not statistically validated. However, the results provide support for a lack of statistically significant relationship between the percentage of non-executive directors and firm value. Besides, by estimating fixed-effects models we found a positive influence of CEO duality on industry-adjusted Tobin’s Q ratio, but not statistically significant when estimating models without cross-sectional effects. The causal relationships between board independence and firm value identified based on Granger causality are not robust.

Keywords

independent directors , non-executive directors , firm value , panel data regression models , Granger causality , vector autoregression