Do Independent Directors Improve Firm Value? Evidence from the Great Recession

Nattawut Jenwittayaroje, Pornsit Jiraporn

Research output: Contribution to journalArticlepeer-review

32 Scopus citations


The literature offers no clear evidence on the effect of independent directors on firm value. We argue that, during stressful times, firms may need more and better expert advice to navigate a crisis. Outside independent directors can provide such advice. So, the role of independent directors may be more pronounced during a stressful time. Consistent with this notion, we find that independent directors significantly improved firm value during the Great Recession of 2008. Specifically, a rise in the percentage of independent directors by one standard deviation would have improved firm value by 4.29% during the Great Recession. Outside the crisis period, however, our results do not show that independent directors increase firm value. Further analysis confirms the results, including random-effects regressions, propensity score matching, instrumental-variable regressions, as well as falsification tests. Our results are crucial as they demonstrate that the role of independent directors is different during stressful times than it is during normal times.

Original languageEnglish (US)
Pages (from-to)207-222
Number of pages16
JournalInternational Review of Finance
Issue number1
StatePublished - Mar 2019

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics


Dive into the research topics of 'Do Independent Directors Improve Firm Value? Evidence from the Great Recession'. Together they form a unique fingerprint.

Cite this