Board Independence and Firm Performance: A Contingency Model Based on Shareholders' Proximity to Management

dc.contributor.authorBozec, Richard
dc.descriptionLe texte intégral de ce document de travail n'est pas disponible en ligne. Pour plus de renseignements sur ce document, veuillez communiquer avec la Direction de la recherche de l'École de gestion Telfer à l'adresse // The full text of this working paper is not available online. For more information regarding this working paper, please contact the Telfer School of Management Research Office at
dc.description.abstractBoard independence is considered as a key corporate governance mechanism to help preserve the necessary checks and balances between the board and executive management. Despite all the value placed on the independent director by financial market participants and regulators, empirical evidence on the relation between board independence and firm performance is largely inconclusive. This creates an excellent opportunity to revisit the underlying theoretical framework that supports the concept of board independence. We propose a contingency model that integrates both agency theory and stewardship theory. We hypothesize that the board independence-performance relationship is moderated by shareholders’ proximity to the locus of management. Shareholders’ proximity to management is defined based on the level of ownership concentration and whether or not the dominant/controlling shareholder holds a top executive position in the firm. The lowest level of proximity is evidenced in firms with dispersed ownership, the highest level, in controlled entities, that is, entities where a shareholder owns more than 50% of the votes (legal control). We propose contrasting predictions regarding the board independence-performance relationship along the shareholders’ proximity spectrum.
dc.titleBoard Independence and Firm Performance: A Contingency Model Based on Shareholders' Proximity to Management
CollectionTelfer - Documents de travail // Telfer - Working Papers

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