Research Discussion Papers, Bank of Finland
No 15/2014:
Professors in the boardroom and their impact on corporate governance and firm performance
Bill B. Francis, Iftekhar Hasan ()
and Qiang Wu
Abstract: Directors from academia served on the boards of around 40%
of S&P 1,500 firms over the 1998–2011 period. This paper investigates the
effects of academic directors on corporate governance and firm performance.
We find that companies with directors from academia are associated with
higher performance and this relation is driven by professors without
administrative jobs. We also find that academic directors play an important
governance role through their advising and monitoring functions.
Specifically, our results show that the presence of academic directors is
associated with higher acquisition performance, higher number of patents
and citations, higher stock price informativeness, lower discretionary
accruals, lower CEO compensation, and higher CEO forced
turnover-performance sensitivity. Overall, our results provide supportive
evidence that academic directors are valuable advisors and effective
monitors and that, in general, firms benefit from having academic
directors.
Keywords: academic directors; professors; firm performance; advising; monitoring; (follow links to similar papers)
JEL-Codes: G30; G34; M41; (follow links to similar papers)
59 pages, July 9, 2014
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- This paper is published as:
-
Francis, Bill B. and Iftekhar Hasan, (2015), 'Professors in the boardroom and their impact on corporate governance and firm performance', Financial Management, Vol. 44, September, No. 3, pages 547-581
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