This study examined the possible impact of board member composition (number
of outside directors), board tenure, board size, and the number of other boards on
which directors serve, on the number of investigations and/or legal proceedings
brought against the sample firms by various individuals, groups, and federal and
state agencies. A sample of 180 firms were selected for study from the financial
services sector ofthe economy for the years 1998-2002.
The results suggest that, contrary to theory, neither the proportion of outside
directors or board size had a significant affect on the number of investigations
brought against the sample firms. Further, as predicted the results revealed a
signtficant and negative link between board tenure and the number of 10K investigations,
and a significant and positive relationship between the number of other
boards served on by directors and the number of investigations. Although contrary
to theory, this last finding offers some evidence that directors who serve on several
other boards may become too distracted to properly monitor their firms.
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