Board monitoring and advising trade-offs amidst economic policy uncertainty

Abstract

We examine the changes in the board's dual roles of monitoring and advising in times of fluctuating economic policy uncertainty (EPU). We find that a rise in EPU leads boards to reduce the size and increase independence and the proportion of female directors. They also decrease the involvement of insiders and outside executives. There is also a drop in the busyness of the directors. Overall, we find that boards enhance their monitoring power to deal with greater EPU.