Outside Directors of Board and Agency Problems

Abstract

In this paper, we examine the effects of board independence in family-controlled firms and non family-controlled firms. Modern corporations is characterized by the separation of management and ownership. Independent outside-directors may play important roles in monitoring inside managers. They may contribute to the reduction of agency costs and the increase of corporate performance. Therefore, this paper investigate the possible effects of independent directors on the asset utilization efficiency as a proxy of agency costs. In order to enhance the robustness of our analysis, we applied four different model specifications and used 2SLS as well as pooled OLS. We find that board independence is positively related to asset utilization, whereas firm size is negatively related to asset utilization. The proportion of dominating shareholders do not influence on the agency costs. Family ownership in family-controlled firms does not appear to have an impact on asset utilization. Received (August 05, 2015), Review Request(August 06, 2015), Review Result(August 21, 2015) Accepted(September 11, 2015), Published(October 31, 2015) (Corresponding Author) 712-714 Dept. Finance & Insurance, Daegu Univ., Jinryang, Kyungsan, Kyungbook, Korea email: bkgong@daegu.ac.kr * 이 논문은 2013학년도 대구대학교 학술연구비지원에 의한 논문임 (This research was supported by the Daegu University Research Grant, 2013). Outside directors of board and agency problems Copyright c 2015 HSST 372