Do Independent Directors Matter?
Sanjai Bhagat, University of Colorado
Bernard Black, Columbia University

The project paper examines how long-term stock performance is related to the fraction of the corporate board that is composed of independent directors. The results show that the proportion of independent directors has little association with performance. If anything, an effect appears to run from performance to the proportion of inside directors. Following poor performance firms tend to have independent directors appointed to their boards. The results suggest that there is little empirical support for the current push for a higher proportion of independent directors on large company boards. (Accepted Fall 1996.)