"Independent Directors' Professional Role Identities,Board Effectiveness, and Firm Performance"

Abstract

Much of prior research on board of directors examines the effects of independent directors from their function as monitors or resource providers. Relatively little attention has been paid to their motivation and tendency to fulfill their duty on a corporate board, despite the fact that most of them are affiliated to other institutions. This study, by applying role identity theory into current board independence research, reveals that official independent directors' identities shaped by external professional roles, determine the overall diligence level of independent directors in executing functions on board. Results support most of our predictions and further show that different types of official independent directors with distinct role identities have different orientations towards decision making, which are reflected in firm’s long-term and short term firm performance.