Date of this Version
Journal of Financial Economics
Although recent research documents a positive relation between corporate transparency and the proportion of independent directors, the direction of causality is unclear. We examine a regulatory shock that substantially increased board independence for some firms, and find that information asymmetry, and to some extent management disclosure and financial intermediation, changed at firms affected by this shock. We also examine whether these effects vary as a function of management entrenchment, information processing costs, and required changes to audit committee independence. Our results suggest that firms can alter their corporate transparency to suit the informational demands of a particular board structure.
© 2014. This manuscript version is made available under the CC-BY-NC-ND 4.0 license http://creativecommons.org/licenses/by-nc-nd/4.0/
corporate governance, board of directors, corporate transparency, information asymmetry, board regulations
Armstrong, C. S., Core, J. E., & Guay, W. R. (2014). Do Independent Directors Cause Improvements in Firm Transparency?. Journal of Financial Economics, 113 (3), 383-403. http://dx.doi.org/10.1016/j.jfineco.2014.05.009
Date Posted: 27 November 2017
This document has been peer reviewed.