The Effect of Board Independence on Information Asymmetry

The Effect of Board Independence on Information Asymmetry

Boards have an important role in ensuring that investors’ interests are protected. Our paper first examines whether the independence of a firm's board affects information asymmetry among investors. We provide evidence that greater board independence leads to lower information asymmetry. Next, w...

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Bibliographic Details
Main Authors: GOH, Beng Wee, LEE, Jimmy, NG, Jeffrey, OW YONG, Kevin
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2016
Subjects:
Corporate governance
board independence
management forecasts
analysts
information asymmetry
Accounting
Corporate Finance
Online Access:https://ink.library.smu.edu.sg/soa_research/1435
https://ink.library.smu.edu.sg/context/soa_research/article/2434/viewcontent/EffectBoardIndependenceInformation_Asymmetry_2015_pp.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:Boards have an important role in ensuring that investors’ interests are protected. Our paper first examines whether the independence of a firm's board affects information asymmetry among investors. We provide evidence that greater board independence leads to lower information asymmetry. Next, we provide evidence that more voluntary disclosure and greater analyst coverage are two underlying mechanisms via which greater board independence reduces information asymmetry. Of the two mechanisms, we find that analyst coverage is more significant in influencing how board independence affects information asymmetry. Overall, our paper contributes to a better understanding of the effect of board independence on information asymmetry.

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