The Importance of Board Independence (IVOR nr. 90) 2012/1.2:1.2 Research questions

The Importance of Board Independence (IVOR nr. 90) 2012/1.2

1.2 Research questions

Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.Deze functie is alleen te gebruiken als je bent ingelogd.

Despite the lack of a clear definition, aim and consequences of independence, the focus of corporate governance reforms after the large corporate scandals in the beginning of the twenty-first century is also on independence (Hopt 2006: 458-459). The scandals resulted in more stringent legislation by means of extensive corporate governance regulations and guidelines for public companies, in particular for company boards and their independence, in order to restore investor confidence and to protect shareholders from director malfeasance (Finegold et al. 2007: 865-866). But it is debatable whether it will work out or has worked out. Therefore the main research question of this study is:

Is the attention paid to board and director independence overrated?

In the previous section it appeared that independence is a subject that can be addressed from legal and economic angles. Besides economic and legal aspects, independence has behavioural components as well. Therefore this subject is approached from these three perspectives: economic, legal and behavioural. The study is divided into three parts and each part is concerned with one of these disciplines. This study’s main emphasis is on the economic and legal part. The behavioural part is less thorough and has an illustrative nature to show aspects of independence other than economic and legal ones.

In order to address the main research question, the three following research questions are formulated:

1.

What is the definition of independence and what constitutes board and director independence?

2.

What is the aim of having board and director independence?

3.

What are the consequences of having board and director independence for the company?

The three parts of this study – economic, legal and behavioural – approach these three questions from their own perspective. It must be stressed that all three building blocks of independence – person, composition/structure and preconditions – are considered in the approach of the main question and the other three research questions. Subsequently, the answers from the economic, legal and behavioural part are aggregated and used to find comprehensive answers to the research questions. Finally, these answers and results are utilised to address the question whether the attention paid to independence is overrated. The research setup and outline of the study are provided in the next section.

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