Independent Directors' Connection and Firm Operating Performance

摘要

This study explores the connection of independent directors to operating performance. Independent directors' connection is measured by their primary companies' lobbying activities. We find that firms with independent directors from a lobbied company have significantly positive impact to the operating performance. Reduction in the firm's financing costs can be a channel through which outside directors' connection affect firm operating performance. Our evidence suggests that in addition to monitoring and advising functions, independent directors can contribute their connection through political influence to the operating performance of the appointed firms.