Research Summary: It is well known in corporate governance scholarship that independent directors differ in the vigilance with which they monitor corporate insiders. This difference depends largely on whether independent directors are concerned more with their public reputation or with their prospects in the director labor market. The explanation for this difference depends on an assumption of information asymmetry, however. In the present study, we relax the assumption of information asymmetry to examine how boardroom transparency affects directors’ monitoring behavior. Using a randomized experimental study of actual independent directors, we find that boardroom transparency amplifies the effect of directors’ inclinations toward either active or passive monitoring, with directors inclined toward vigilant monitoring becoming even more vigilant, and directors inclined toward passive monitoring becoming even more passive.
Strategic Management Journal – Wiley
Published: Jan 1, 2018
Keywords: ; ; ; ;
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