The optimum boardroom composition and the limitations of the agency theory.

Subject:
Agency theory (Evaluation)
Boards of directors (Research)
Corporate governance (Evaluation)
Author:
Rebeiz, Karim S.
Pub Date:
01/01/2008
Publication:
Name: Journal of Academy of Business and Economics Publisher: International
Academy of Business and Economics Audience: Academic Format:
Magazine/Journal Subject: Business; Business, general; Economics; Government
Copyright: COPYRIGHT 2008 International Academy of Business and Economics
ISSN: 1542-8710
Issue:
Date: Jan, 2008 Source Volume: 8 Source Issue: 1
Topic:
Event Code: 310 Science & research
Geographic:
Geographic Scope: United States Geographic Code: 1USA United States

Accession Number:
192587608
Full Text:
ABSTRACT

I examine the extent of the linkage between the percent independent directors in
the boardroom (measured by the ratio of independent directors over total
directors) and the market returns of firms belonging to the technology,
engineering and communication industries. The results indicate that an
independent boardroom configuration positively impacts on the financial
performance of the firms, which is in compliance with the agency theory of the
firm. The relationship "boardroom configuration--financial performance" is
however not linear in nature, but rather curvilinear with a negative concavity.
The implication is that there is a limitation to the agency theory of the firm as the
optimum boardroom configuration does not consist of 100% independent
directors; instead, it comprises a minority of inside directors to compensate for
the information deficit inherent with a 100% independent boardroom
configuration.

Keywords: Board of Directors; Corporate Governance; Agency Theory; Boardroom

Composition; Outside Directors; Inside Directors; Financial Performance

1. INTRODUCTION

The separation of ownership and corporate control has resulted in agency cost
because the passive owners are largely unaware of the subtle conflicts of
interests regulating the principal-agent interactions, particularly that they no
longer have the jurisdiction over the modus operandi of the firm. The agency
cost is further magnified in the case of largely diffused and heterogeneous
ownership because the control mechanism and the managerial incentives are
weak. Without an adequate mechanism of checks and balances, management
would operate in all impunity or minimum accountability (Agrawal and Knoeber,
1996; Bothwell, 1980). This situation has created a propitious setting for free-ride
opportunisms as some shareholders may take advantage on the efforts of other
fellow shareholders to do the monitoring of the firm on their behalf. In effect, the
costs of corporate monitoring are borne by a few shareholders, while the benefits
of an active monitoring are shared by all of them. According to Fama and Jensen
(1983), and to Jensen and Meckling (1976), the agency problem would not arise
if it were possible to write a "complete contract" to ensure that the managers are
running the businesses with the best interest of the shareholders in mind.
However, complete contracts are impractical for the obvious reason that it would
be costly and unrealistic to anticipate all the contingencies involved in running
the daily operations of the business.

An independent boardroom configuration would mitigate the agency cost of the

firms due to the detachment of the independent directors from the management
team. Conversely, an insider-dominated boardroom is marred with conflicts of
interests. Indeed, inside directors are often put in the awkward (if not impossible)
position of evaluating the CEO who is after all their boss. Their judgments are
consciously or unconsciously impaired by personal needs or fears. For example, a
board consisting predominantly of inside directors may vote to unduly increase
the compensation of the management team, which would result in an
unwarranted transfer of wealth from the shareholders to the managers.
Nonetheless, the determination of the optimum boardroom composition (one
that would translate into superior financial performance for the firm) is still being
vigorously debated in the corporate governance literature (e.g., Hermalin and
Weisbach, 2003; Hillman and Dalziel, 2003; Daily et al., 2003; Gompers et al.,
2003; Fields and Keys, 2003). Past results on the topic are mixed and often
contradictory. A consensus does not exist on the issue because the association
between boardroom configuration and firm's financial performance is often
blurred by idiosyncratic firm's attributes, a notable one being the micro and
macro environment, and the competitive position of the firms within its industry
(Demsetz and Lehn 1985).

I revisit the issue "boardroom configuration--financial performance" by confining

the scope of the investigation to the technology, engineering and communication
sectors. The utilization of such firms is justified from the standpoint that the level
of information needed by the board in such industries is usually more complex
and more elaborate than in other organizational contexts. Moreover, the
engineering and high tech sectors have predominantly fallen outside the radar
scrutiny of the corporate governance literature. Accordingly, this investigation
would provide a fresh perspective and would shed new lights on an important
subject. The findings of this investigation point out that the boardroom's
independent composition varies in a curvilinear manner (and with a negative
concavity) with the market returns of the firms. This study confirms the agency
theory of the firm by showing that independent directors are predominantly more
effective monitors of corporate stewardship than inside directors. The results
also highlight the limitations of the agency theory of the firm because there is a
residual value-added component of incorporating a minimum number of inside
directors (executives) into the boardroom.

2. LITERATURE REVIEW

Three different schools of thoughts have emerged from the stream of research
linking the boardroom configuration to the performance of the firm as reflected
in the following propositions:

Proposition 1: The outside-dominated board improves on the performance of the

firm in conformance with the agency theory of the firm. The outside directors
could add value to the firm through a controlling/monitoring role, and a servicing
role. Rosenstein and Wyatt (1990) show that the increase of the critical mass of
outside directors to an already outsider dominated board results in modest
higher returns. Lee et al. (1992) also indicate that shareholder's wealth increases
during a management buy out in the case of outside-dominated boardrooms. In
addition, Barnhart et al. (1994) pinpoint that when outside directors begin to
dominate the board, performance is positively affected by this increase in
independence. As it specifically relates to the controlling and monitoring role of
the board, Kesner and Johnson (1990) report that boards being sued for failure to
maintain their fiduciary responsibilities to the shareholders have a greater
proportion of inside directors. Similarly, Crutchley et al. (2007) suggest that firms
are more vulnerable to fraud if there are fewer outsiders on the audit committee
and if the outside directors appear overcommitted by other board assignments.
Moreover, Weisbach (1998) reports a greater likelihood of CEO's turnover in
outsider-dominated boards than in insider-dominated boards and this occurrence
is correlated with firm performance. As it specifically pertains to the servicing
role, the outside directors offer a fresh perspective and advice to the CEO
because of their unique expertise and experience in different firms and
industries. In addition, they fulfill a valuable resource dependence role; i.e., they
are in a unique position to secure outside resources and information from the
external world due to their associations with other firms and their networking
relationships (Dalton et al., 1998).

Proposition 2: The inside-dominated board improves on the performance of the

firm in conformance to the stewardship theory of the firm. As background
information, the stewardship theory is the antithesis of the agency theory; it
assumes that managers are loyal stewards for the corporation with no conflict of
interest (Donaldson and Preston, 1995; Fox and Hamilton, 1994; Donaldson and
Davis, 1991; Mizruchi, 1983). Accordingly, the corporate control should be
bestowed to the managers because of their intimate knowledge of the business,
its competitive environment and its macro environment (Davis et al., 1997). For
instance, Kesner (1987) states that inside dominated boardrooms yield to better
firm performances than outside dominated boardrooms (the study is confined to
Fortune 500 firms). Vance (1978) reports a positive and significant relationship
between the proportion of inside directors and returns to investors. Baysinger
and Hoskinson (1990) suggest that insider directors have more and easier access
to corporate information than outsiders, and that this situation would lead to
more effective evaluation of top managers.

Proposition 3: An increase in outside representation on a company's board of

directors does not automatically translate into superior financial performance for
the firm. Klein (1998) and Mehran (1995) indicate a non-significant association
between accounting performance measures and the portion of outside directors
comprising the boardroom. Likewise, Hermalin and Weisbach (1991) find no
significant relationship between the proportion of outside directors and Tobin's Q
performance measure. Bhagat and Black (2002; 1999) also show no relationship
between board composition and long-term stock market and accounting
performance. In addition, a meta-analysis review of 54 empirical studies reports
no systemic link between governance structure and financial performance
(Dalton et al. 1998).

3. RESEARCH METHODOLOGY

The null hypothesis in this study is that the independent boardroom composition
does not impact on the financial performance of the firm. In this context, the
concept of independence is not merely confined to the outside directorship
position, but to functional activities that span beyond the directorship position.
The NYSE definition of an independent director has been adopted herein, namely
that a board member should have no material personal or business affiliations
with the firm that span beyond the customary directorship functions. The
independent director could have been an ex-executive to the firm provided that
five years have passed since the individual has been employed by or has been
otherwise affiliated with the company.

The sample consists of 158 publicly-listed firms that are drawn from the
Compustat database. The chosen firms have been publicly trading in the U.S.
organized exchanges for more than 12 years. In other words, they have passed a
minimum maturity level in the life cycle in terms of growth and earnings
performance. The data on the corporate governance and firms' attributes have
been obtained from the annual filing in the EDGAR/SEC filings databases and the
Corporate Register. The dependent variable used in this study is the market
return of the firm, which is equal to the total increase in shareholder wealth (i.e.,
share price appreciation and income from dividends--measured on a yearly
basis). The average market return represents the geometric mean over a fiveyear period spanning from January 2002 to January 2007. It is noteworthy that
past investigations have utilized accounting returns (e.g., return on equity) as a
proxy to financial performance (Bhagat and Black 2002, 1999; Klein 1998;
Mehran 1995; Hermalin and Weisbach 1991). Nonetheless, the recent trend in
the academic literature has been in the direction of short and long-term

shareholders' wealth (Bauer et al. 2004; Drobetz et al. 2003; Gompers et al.
2003).

The explanatory variable is the percent of independent directors in the

boardroom. The control variables include beta (the firm's systematic risk), the
insiders' holdings (the percentage of shares owned by insiders and top 5%
owners), the board's size (the sum of the insiders, the outsiders and the gray
directors), the market capitalization of the firms (the share price multiplied by
the number of outstanding shares), and the boardroom leadership configuration
(whether the boardroom adopt a dual or dissociated CEO/Chairmanship
boardroom leadership structure). The aforementioned independent variables are
the arithmetic averages for the years January 1997-January 2002. The lag time
difference between independent and dependent variables is justified by the fact
that the directional impact of specific firms' attributes on a variety of
organizational outcomes is not an instantaneous phenomenon.

4. RESULTS AND DISCUSSION

The sample descriptive statistics are shown in Tables 1. The average market
returns (over a five year period) of the firms in the sample is 11.59% per year.
The average percent of independent directors in the boardroom is 76%. In terms
of leadership structure, 33% of the firms actually dissociate the roles of CEO and
Chairmanship to the board. These statistics conform to the general corporate
governance trend in the U.S. market.

The correlation matrix, shown in Table 2, suggests that the board's size and the
percent of independent directors are positively related to the market
capitalization of the firm. In other words, large size firms have more inclinations
to adopt large boardroom sizes that also consist of a higher fraction of
independent directors. Conversely, the board's leadership is negatively related to
the market capitalization, thus suggesting that the probability of having the
combined boardroom leadership structure increases with the size of the firm.

I begin the OLS regression on the market returns with a simple specification that
contains the control variables, namely beta, insider's holdings, board's size,
market capitalization and leadership configuration (i.e., establishing the control
model). I then add the linear, quadratic and cubic terms of the explanatory
variable (represented by independent directors) to assess linear and non-linear
effects of the augmented models over the control model. At each step of the
process, the significance in the difference of R square between the augmented

model and the preceding one is assessed for its significance at the 95% level
(two-tailed).

The different regression models used in this study are illustrated in the equations
below:

Control Model:

[MR.sub.i(t+5)] = [[alpha].sub.c][BE.sub.i(t)] + [[beta].sub.c][IH.sub.i(t)] +

[[chi].sub.c][BS.sub.i(t)] + [[delta].sub.c][MC.sub.i(t)] + [[gamma].sub.c]
[BL.sub.i(t)] + [[epsilon].sub.c] (1)

Augmented Model I:

[MR.sub.i(t+5)] = [[alpha].sub.1][BE.sub.i(t) + [[beta].sub.1][IH.sub.i(t)] +

[[chi].sub.1][BS.sub.i(t)] + [[delta].sub.1][MC.sub.i(t)] + [[gamma].sub.1]
[BL.sub.i(t)] + [[eta].sub.1][ID.sub.i(t)] + [[epsilon].sub.1] (2)

[Model 1 is the control model augmented by the variable independent directors]

Augmented Model 2:

[MR.sub.i(t+5)] = [[alpha].sub.2][BE.sub.i(t)] + [[beta].sub.2][IH.sub.i(t)] +

[[chi].sub.2][BS.sub.i(t)] + [[delta].sub.2][MC.sub.i(t)] + [[gamma].sub.2]
[BL.sub.i(t)] + [[eta].sub.2][ID.sub.i(t)] + [[lambda].sub.2][ID.sup.2.sub.i(t)] +
[[epsilon].sub.2] (3)

[Model 2 is model 1 augmented by the variable independent directors to the

square]

Augmented Model 3:

[MR.sub.i(t+5)] = [[alpha].sub.3][BE.sub.i(t)] + [[beta].sub.3][IH.sub.i(t)] +

[[chi].sub.3][BS.sub.i(t)] + [[delta].sub.3][MC.sub.i(t)] + [[gamma].sub.3]
[BL.sub.i(t)] + [[eta].sub.3][ID.sub.i(t)] + [[lambda].sub.3][ID.sup.2.sub.i(t)] +
[[mu].sub.3][ID.sup.3.sub.i(t)] + [[epsilon].sub.3] (4)

[Model 3 is model 2 augmented by the variable independent directors to the

cube]

where

i = Firm 1 through 158

MR = Market return

BE = Beta (a measure of systematic risk)

IH = Insiders' holdings

BS = Board's size

MC = Market capitalization

BL = Board's leadership, a dummy variable in which a value of zero is assigned

to the dual (joint) leadership structure and a value of one is allocated to the nonduality configuration

IND = Ratio of independent directors over board's size

The overall hierarchical OLS assessment on the market returns is shown in Table
3. The OLS findings indicate that the addition of "independent directors" variable
to the control model results in significant improvement of R square for the
quadratic and cubic models. In other words, a large percent of market returns

variations could be explained collectively by the independent directors when it is

accounted in a non-linear fashion. It is therefore evident that the percent of
independent directors' variable does influence the market returns of the firm,
and this variation is in the form of a polynomial equation. In fact, the model 3
(that contains the linear and non-linear terms of the independent directors'
variable) has a coefficient of determination of 0.619, which is a significant value
for this kind of an investigation. To test the robustness of the aforementioned
findings, the same hierarchical regression (with the same control and augmented
models) is repeated with the Tobin's Q, which is defined as the ratio of the
market value of a firm's assets (i.e., the market value of outstanding stock and
debt over the replacement cost of the firm's assets). The Tobin's Q used herein is
the arithmetic mean over the period January 2002- January 2007. The overall
OLS hierarchical results on the Tobin's Q, shown in Table 4, are in many respects
similar to those obtained previously with the market returns. This analysis
validates the previous regression (with market returns) that the financial
performance of the firm is enhanced with higher boardroom independence, and
that this relationship is curvilinear and not linear.

The unstandardized and standardized OLS coefficients (beta weights)

corresponding to the control and the added models for the market returns and
the Tobin's Q are shown in Tables 5 and 6, respectively. The results indicate that
the coefficient of the independent directors corresponding to the linear model
(model 1) is significantly different than zero. Thus, the null hypothesis should be
rejected at the 5% level. The same findings also apply to the coefficients of the
independent directors for the quadratic and cubic terms of models 2 and 3,
respectively. Likewise, the sign of the coefficient for the independent directors for
the model 1 (linear model) is positive, which indicates a positive directional
impact of the independent directors on the market returns of the firm. The sign
corresponding to the coefficient of the quadratic term (model 2) is negative,
which indicates that the non-linear relationship between the boardroom's
independent composition and the financial performance of the firm has a
negative concavity. In other words, the optimum boardroom configuration does
not comprise 100% outside/independent directors; rather the optimum
boardroom consists of majority of outside directors (close to 80%) and a minority
of inside directors (close to 20%).

5. CONCLUSIONS

This investigation does recognize the financial superiority of an outsiderdominated boardroom in conformance with the agency theory of the firm. It also
acknowledges the importance of including a minority of executives in the
boardroom to compensate for the information deficit that is associated with a
100% outsider-dominated boardroom, thus highlighting the limitations of the

agency theory of the firm. The inside directors provide valuable information on
the products, processes, and culture of the firm, as well as its external
surrounding. As a matter of fact, a previous study conducted by Bhagat and
Black (1999) gives evidence to the limitation of the agency theory; they report
that firms with supermajority-independent boards are less profitable than other
firms. Undoubtedly, the presence of inside directors with intimate knowledge of
the firm helps in expeditiously and effectively securing key information from the
right sources. Moreover, Adams and Ferreira (2007) indicate that the presence of
inside directors could produce a friendly board that is propitious to receiving the
right information and, accordingly, providing the right advice to the CEO.
Although inside directors do have an essential function within the confines of the
boardroom, their span of influence should, however, be strictly limited to an
advisory role; they should certainly not assume a monitoring and controlling role.
Specifically, they should not serve in the key committees (e.g., audit,
compensation, nominating), nor be involved in the selection of outside
consultants because of obvious conflicts of interests inherent to their dual roles
as directorates and executives to the firm.

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Karim S. Rebeiz, American University of Beirut, Beirut, Lebanon

Dr. Karim S. Rebeiz earned his Ph.D. from the University of Texas at Austin and
his MBA from Harvard Business School. He has many years of responsible
professional experience in Finance at Ford Motor Company. He is currently an
Associate Professor in the Suliman Olayan School of Business at the American
University of Beirut.
TABLE 1. DESCRIPTIVE STATISTICS

Standard
Variables

Average Deviation Skewness Kurtosis

Market Returns
Beta

11.59%
0.74

Insiders' Holdings

2.15%

0.441

17.40%

Board's Size

9.02

Market Capitalization

0.714

20.58%
2.58

9034.72

-1.122
1.419
2.058

0.563
2497.13

1.191

5.695

0.470
4.934

7.902

(Mils.)
Separate CEO / Chairman * 32.91%
Independent Directors

76.45%

-13.07%

-1.933

--1.191

* Dummy variable

TABLE 2. PEARSON CORRELATION MATRIX FOR INDEPENDENT VARIABLES

Independent Variables

1. Beta
2. Insiders' Holdings

1.000
0.019

1.000

3. Board's Size

-0.073 -0.053

1.000

4. Market Capitalization -0.114 -0.190

5. Boards' Leadership

-0.066

0.290

0.271 -0.044

6. Independent Directors -0.177 -0.129

Independent Variables

0.067

1. Beta
2. Insiders' Holdings
3. Board's Size
4. Market Capitalization
5. Boards' Leadership
6. Independent Directors

1.000
-0.150

1.000

0.206 -0.021

1.000

TABLE 3. OVERALL HIERARCHICAL OLS ASSESSMENT ON MARKET RETURNS

Statistics

Control Model Model 1

0.149

R Square
F Statistics

0.022
0.691

R Square Change
F Change
Significance of

0.417

Model 2

0.683

0.174
28.400

27.709
0.631

0.787

0.466
110.720

0.152

0.293
82.320
0.000 *

F Change

* Significant at the 0.05 level (2-tailed)

Model 3

0.619
170.458
0.153
59.738
0.000 *

TABLE 4. OVERALL HIERARCHICAL OLS ASSESSMENT ON TOBIN'S Q

Statistics

Control Model Model 1 Model 2

0.151

R Square
F Statistics

0.388

0.023
0.713

R Square Change
F Change
Significance of

0.626

0.151

0.000

0.533

82.871

0.128
22.663

0.746

0.393

23.376

Model 3

138.408

0.241

0.165

59.495

55.537

0.000 *

0.000 **

F Change

* Significant at the 0.05 level (2-tailed)

TABLE 5. REGRESSION COEFFICIENTS FOR MARKET RETURNS

Models

Unstandardized Standardized
Coefficients

Coefficients

Control Model
Beta
Insiders' Holdings
Board's Size
Market Capitalization
Board's Leadership
Constant

Model 1

-0.503
0.000
0.070

-0.103
-0.004
0.084

0.000

-0.19

-0.321

-0.070

11.460

Beta
Insiders' Holdings
Board's Size

-0.200
0.004

0.036

0.070

Market Capitalization
Board's Leadership

0.084

0.000

-0.089

-0.362

-0.079

Independent Directors
Constant

-0.041

0.062

0.405

6.498

Model 2
Beta
Insiders' Holdings
Board's Size

-0.264

-0.054

-0.006
0.136

Market Capitalization
Board's Leadership

0.163

0.000

-0.066

-0.044

-0.010

Independent Directors

0.589

[(Independent Directors).sup.2]
Constant

-0.059

3.853

-0.389

-3.516

-10.796

Model 3
Beta
Insiders' Holdings
Board's Size

-0.029

-0.006

-0.003
0.031

Market Capitalization
Board's Leadership
Independent Directors

-0.025
0.038

0.000

-0.024

-0.021

-0.005

-0.743

-4.859

[(Independent Directors).sup.2]

1.879

16.963

[(Independent Directors).sup.3]

-1.197

-11.946

Constant

13.207

Models

t Values Significance

Control Model
Beta
Insiders' Holdings
Board's Size

-1.276

0.206

-0.045

0.964

1.002

0.318

Market Capitalization

-0.223

0.824

Board's Leadership

-0.837

0.404

Constant

15.336

0.000

Model 1
Beta
Insiders' Holdings
Board's Size

-0.540

0.590

0.462

0.645

1.081

0.281

Market Capitalization

-1.107

0.270

Board's Leadership

-1.022

0.309

Independent Directors
Constant

5.264
5.568

0.000 *

0.000

Model 2
Beta
Insiders' Holdings
Board's Size

-0.885

0.378

-0.928
2.585

0.355
0.011

Market Capitalization

-1.015

0.312

Board's Leadership

-0.153

0.879

Independent Directors

10.006

[(Independent Directors).sup.2]

-9.073

0.000 *
0.000 *

Constant

-5.079

0.000

Model 3
Beta

-0.114

Insiders' Holdings

0.910

-0.451

Board's Size

0.652

0.674

0.501

Market Capitalization

-0.440

0.660

Board's Leadership

-0.085

0.932

Independent Directors

-4.141

0.000 *

[(Independent Directors).sup.2]

6.353

0.000 *

[(Independent Directors).sup.3]

-7.729

0.000 *

Constant

3.678

0.000 *

* Significant at the 0.05 level (2-tailed)

TABLE 6. REGRESSION COEFFICIENTS FOR TOBIN'S Q

Unstandardized Standardized
Models

Coefficients

Coefficients

Control Model
Beta

-0.082

Insiders' Holdings
Board's Size

0.000
0.009

-0.115
-0.017
0.072

Market Capitalization

0.000

-0.032

Board' s Leadership

-0.046

-0.069

Constant

1.300

Model 1
Beta

-0.042

Insiders' Holdings

-0.058

0.000

Board's Size

0.020

0.009

0.071

Market Capitalization

0.000

-0.096

Board' s Leadership

-0.051

-0.077

Independent Directors
Constant

0.008

0.371

0.636

Model 2
Beta

-0.050

Insiders' Holdings

-0.070

-0.001

Board's Size

-0.067

0.017

0.143

Market Capitalization

0.000

-0.075

Board' s Leadership

-0.009

-0.014

Independent Directors

0.078

[(Independent Directors).sup.2]
Constant

3.502

-0.052

-3.192

-1.654

Model 3
Beta

-0.014

Insiders' Holdings
Board's Size

-0.020

-0.000
0.002

-0.030
0.013

Market Capitalization

0.000

-0.032

Board's Leadership

-0.006

-0.009

Independent Directors

-0.124

-5.560

[(Independent Directors).sup.2]

0.293

18.109

[(Independent Directors).sup.3]

-0.182

-12.426

Constant

Models

1.988

t Values Significance

Control Model
Beta

-1.423

Insiders' Holdings

0.157

-0.197

Board's Size

0.844

0.856

0.393

Market Capitalization

-0.372

0.711

Board' s Leadership

-0.822

0.412

Constant

11.955

0.000

Model 1
Beta

-0.760

Insiders' Holdings

0.448

0.252

Board's Size

0.801

0.910

0.364

Market Capitalization

-1.178

0.241

Board' s Leadership

-0.982

0.328

Independent Directors
Constant

4.761

3.686

0.000 *

0.000

Model 2
Beta

-1.078

Insiders' Holdings
Board's Size

0.283

-0.977
2.130

0.330
0.035

Market Capitalization

-1.082

0.312

Board' s Leadership

-0.209

0.879

Independent Directors

8.516

0.000 *

[(Independent Directors).sup.2]
Constant

-7.714

-4.995

0.000 *

0.000

Model 3
Beta

-0.360

Insiders' Holdings

0.719

-0.520

Board's Size

0.217

0.604
0.829

Market Capitalization

-0.533

0.595

Board's Leadership

-0.152

0.880

Independent Directors

-4.392

0.000 *

[(Independent Directors).sup.2]

6.287

0.000 *

[(Independent Directors).sup.3]

-7.452

0.000 *

Constant

3.519

0.001

* Significant at the 0.05 level (2-tailed)

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Copyright 2008 Gale, Cengage Learning. All rights reserved.