The influence of the board on firm performance: An empirical vision in the Spanish capital market

Abstract

Corporate governance research suggests that board monitoring will be more effective if boards consist primarily of independent outside directors. However, the results of previous studies testing board effectiveness have been mixed. We offer new insights of these relationships in a country whose particular corporate governance system is characterized by high concentration of ownership, mainly through pyramidal groups, and low legal protection of investors. Specifically, the aim of this paper is to investigate the influence of the independent directors on firm performance in Spain. We find that the addition of independent directors to the boards increases firm value, as the relationship between the proportion of independent directors and performance is positive and significant.