Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups

Carlos Pombo, Luis H. Gutiérrez

Resultado de la investigación: Contribución a RevistaArtículo

45 Citas (Scopus)

Resumen

We investigate the relation of board structure through the appointments of outside directors and the role of busy directors on firm return on assets within an environment of no regulation for privately held firms and voluntary adoption of corporate best practices for security issuers with family controlling blockholders. This study relies on a sample of an average of 335 firms per year for the 1996-2006 period, where 244 are private firms and 285 are affiliated to one of the seven largest non-financial business groups in the country. Five of these groups were, in 2006, still family-controlled. We find a positive relation between both the ratio of outside directors, and the degree of board interlocks, with firm return-on-assets. Outside busy directors turned out to be key drivers of improved firm performance. Appointments of outsiders are endogenous to firm ownership structure. Blockholder activism as well as contestability becomes an internal mechanism that improves director monitoring and ex-post firm valuation. © 2011 Elsevier Inc.
Idioma originalEnglish (US)
Páginas (desde-hasta)251-277
Número de páginas27
PublicaciónJournal of Economics and Business
DOI
EstadoPublished - jul 1 2011

Huella dactilar

Empirical evidence
Outside directors
Business groups
Firm performance
Interlock
Return on assets
Blockholders
Firm ownership
Firm valuation
Best practice
Outsider
Private firms
Activism
Ownership structure
Contestability
Monitoring
Board structure

Citar esto

@article{2fb02507fa034028b02ba1e0e4efc5df,
title = "Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups",
abstract = "We investigate the relation of board structure through the appointments of outside directors and the role of busy directors on firm return on assets within an environment of no regulation for privately held firms and voluntary adoption of corporate best practices for security issuers with family controlling blockholders. This study relies on a sample of an average of 335 firms per year for the 1996-2006 period, where 244 are private firms and 285 are affiliated to one of the seven largest non-financial business groups in the country. Five of these groups were, in 2006, still family-controlled. We find a positive relation between both the ratio of outside directors, and the degree of board interlocks, with firm return-on-assets. Outside busy directors turned out to be key drivers of improved firm performance. Appointments of outsiders are endogenous to firm ownership structure. Blockholder activism as well as contestability becomes an internal mechanism that improves director monitoring and ex-post firm valuation. {\circledC} 2011 Elsevier Inc.",
author = "Carlos Pombo and Guti{\'e}rrez, {Luis H.}",
year = "2011",
month = "7",
day = "1",
doi = "10.1016/j.jeconbus.2011.01.002",
language = "English (US)",
pages = "251--277",
journal = "Journal of Economics and Business",
issn = "0148-6195",
publisher = "Elsevier Inc.",

}

Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups. / Pombo, Carlos; Gutiérrez, Luis H.

En: Journal of Economics and Business, 01.07.2011, p. 251-277.

Resultado de la investigación: Contribución a RevistaArtículo

TY - JOUR

T1 - Outside directors, board interlocks and firm performance: Empirical evidence from Colombian business groups

AU - Pombo, Carlos

AU - Gutiérrez, Luis H.

PY - 2011/7/1

Y1 - 2011/7/1

N2 - We investigate the relation of board structure through the appointments of outside directors and the role of busy directors on firm return on assets within an environment of no regulation for privately held firms and voluntary adoption of corporate best practices for security issuers with family controlling blockholders. This study relies on a sample of an average of 335 firms per year for the 1996-2006 period, where 244 are private firms and 285 are affiliated to one of the seven largest non-financial business groups in the country. Five of these groups were, in 2006, still family-controlled. We find a positive relation between both the ratio of outside directors, and the degree of board interlocks, with firm return-on-assets. Outside busy directors turned out to be key drivers of improved firm performance. Appointments of outsiders are endogenous to firm ownership structure. Blockholder activism as well as contestability becomes an internal mechanism that improves director monitoring and ex-post firm valuation. © 2011 Elsevier Inc.

AB - We investigate the relation of board structure through the appointments of outside directors and the role of busy directors on firm return on assets within an environment of no regulation for privately held firms and voluntary adoption of corporate best practices for security issuers with family controlling blockholders. This study relies on a sample of an average of 335 firms per year for the 1996-2006 period, where 244 are private firms and 285 are affiliated to one of the seven largest non-financial business groups in the country. Five of these groups were, in 2006, still family-controlled. We find a positive relation between both the ratio of outside directors, and the degree of board interlocks, with firm return-on-assets. Outside busy directors turned out to be key drivers of improved firm performance. Appointments of outsiders are endogenous to firm ownership structure. Blockholder activism as well as contestability becomes an internal mechanism that improves director monitoring and ex-post firm valuation. © 2011 Elsevier Inc.

U2 - 10.1016/j.jeconbus.2011.01.002

DO - 10.1016/j.jeconbus.2011.01.002

M3 - Article

SP - 251

EP - 277

JO - Journal of Economics and Business

JF - Journal of Economics and Business

SN - 0148-6195

ER -