phbs
Group Dynamics and Director Dissent in Corporate Boards
by Seungjoon Oh, PHBS

Wednesday, September 14, 2016 | 12:00pm - 1:00pm | Room 337, HSBC Business School Building


Abstract


While several studies examine how differences in director characteristics impact firm-level performance outcomes, there is limited evidence that heterogeneous boards affect firm value by offering diverse opinions. This is partly due to data availability on the process and outcome of board decisions. We utilize Korean data on individual director voting at board meetings to directly measure director dissent as evidence of diversity of opinion. We find that directors in heterogeneous boards are more likely to vote against management proposals and reject them. Firms that experience proposal rejection exhibit lower return volatility, consistent with independent directors restricting CEO influence. Firm value implications of director dissent and proposal rejection varies depending on firm complexity and industry dynamism. Our results suggest that board diversity, by increasing dissenting opinions and proposal rejections, affects firm performance.