Friendly boards and innovation

Jun Koo Kang; Wei Lin Liu; Angie Low; Le Zhang

doi:10.1016/j.jempfin.2017.09.007

Friendly boards and innovation

Jun Koo Kang, Wei Lin Liu, Angie Low, Le Zhang^*

^*Corresponding author for this work

Research output: Contribution to journal › Article › peer-review

78 Citations (Scopus)

Abstract

We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms’ advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.

Original language	English
Pages (from-to)	1-25
Number of pages	25
Journal	Journal of Empirical Finance
Volume	45
DOIs	https://doi.org/10.1016/j.jempfin.2017.09.007
Publication status	Published - Jan 2018
Externally published	Yes

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10.1016/j.jempfin.2017.09.007

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title = "Friendly boards and innovation",

abstract = "We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms{\textquoteright} advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.",

keywords = "Board advising, Board of directors, Corporate governance, Corporate innovation, Firm value, Social ties",

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AU - Low, Angie

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AB - We examine how friendly boards affect firm innovation. Using CEO-director social connections as a measure of board friendliness, we find that firms with friendly boards create more patents and citations. The positive relation between friendly boards and innovation are more pronounced when firms’ advisory needs are higher or when firms operate in innovative industries. Friendly boards are also associated with higher firm value, especially when firms have higher advisory needs or when innovation is an important source of firm value. Our results support the positive view on a friendly board perspective that directors serve as valuable advisors to CEOs.

KW - Board advising

KW - Board of directors

KW - Corporate governance

KW - Corporate innovation

KW - Firm value

KW - Social ties

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Friendly boards and innovation

Abstract

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