Recently posted to SSRN:
This paper investigates the value of academic independent directors’ (ADs’) services by exploring an unexpected policy shock that forces ADs to resign from Chinese listed firms. Empirical results show that around the announcement of this policy, the stock prices of firms with ADs drop by 2.2%, which can be translated to a 135M RMB loss. These results suggest a likely causal relation between AD presence and firm value. ADs with academic backgrounds related to the firms’ primary line of business, with connections to an industry association, and holding top positions in a prestigious university are more valuable to firms. For ADs with business backgrounds, their services are more valuable when sitting on some specific board subcommittees. Moreover, ADs are more hardworking as they miss fewer meetings. Consistent with the market reactions, firm fundamentals and the efficiency of independent director monitoring and advising deteriorate significantly after ADs actually resign.
Liu, Bibo and Wei, Wei and Zhou, Zhen, The Value of Academic Independent Directors (December 1, 2019). Available at SSRN: https://ssrn.com/abstract=3504140 or http://dx.doi.org/10.2139/ssrn.3504140
