A note on board directors

Abstract

Additional evidence on the importance of independent board directors is provided. A positive and statistically significant link between the shareholder wealth effects of acquisition decisions and the percentage of outside board directors is found. This result is controlled for the possible effects of manager-shareholder interest alignment and synergetic gains. Moreover, the positive wealth effect diminishes as the square of the percentage of outside directors increases, suggesting a critical percentage for outside directors. Also there is evidence that the benefits of outside director monitoring is weakened without a certain level of managerial ownership.