Prague Economic Papers 2012, 21(4):470-486 | DOI: 10.18267/j.pep.435

Do the Board of Directors' Characteristics Influence Firm's Performance? The U.S. Evidence

Roman Horváth1, Persida Spirollari2
1 Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Opletalova 26, Praha 1, 110 00 (roman.horvath@gmail.com).
2 Alpha Bank Albania, Tirana, Albania. R. Horvath acknowledges the support from the Czech Science Foundation Grant No. 402/11/1487.

We examine the relationship of selected Board of Directors' characteristics and firm's financial performance. Using a sample of large U.S firms in 2005-2009, we find that the degree of insider ownership influences positively firm performance, because it reduces agency problems. The age of the Board of Directors matters, to a certain degree, as well. Younger members are probably willing to bear more risk and to undertake major structural changes to improve firm's future prospects. On the other hand, we find that independent directors reduce firm performance and this negative effect was even more important during the recent financial crisis. We suppose that independent directors prefer overly conservative business strategies in order to protect shareholders, but this goes at the cost of lower firm's performance. All in all, our results suggest that corporate governance is important for firm's financial performance.

Klíčová slova: corporate governance, financial crisis, risk, firm´s performance, board of directors, agency problems
JEL classification: G32, G34

Zveřejněno: 1. leden 2012  Zobrazit citaci

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Horváth, R., & Spirollari, P. (2012). Do the Board of Directors' Characteristics Influence Firm's Performance? The U.S. Evidence. Prague Economic Papers, 21(4), 470-486. doi: 10.18267/j.pep.435
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