Powerful Independent Directors

Powerful Independent Directors

Kathy Fogel, Liping Ma, Randall Morck

Series number :

Serial Number: 

Date posted :

January 01 2014

Last revised :

January 22 2014
SSRN Share


  • Corporate governance • 
  • Director Independence • 
  • agency problem • 
  • Social Networks • 
  • Power Centrality • 
  • Behavioral Finance

Shareholder valuations are economically and statistically positively correlated with independent directors? power, gauged by social network power centrality. Powerful independent directors? sudden deaths reduce shareholder value significantly; other independent directors? deaths do not. More powerful independent directors Granger cause higher valuations; the converse is not true.

Further tests associate more powerful independent directors with less value-destroying M&A, less free cash flow retention, more CEO accountability, and less earnings management. We posit that more powerful independent directors better detect and counter CEO missteps because of better access to information, greater credibility in challenging errant top managers, or both.


Real name:
Kathy Fogel
Real name:
Liping Ma