Management Accounting Section Midyear Meeting

Board Meetings and the Information Gap Between Managers and Independent Directors

• In Event: Corporate Boardrooms (Archival)

Abstract

I examine whether board meetings serve as a channel through which independent directors reduce their information disadvantage vis-à-vis managers, as proxied by the relative profitability of their insider purchases. I hypothesize that when the board meets more frequently, independent directors acquire more non-public information and trade more profitably relative to executives. Using data from 1992 to 2015, I find support for my hypothesis, but only during the post-2003 period. Further analysis shows that directors’ ability to acquire information from board meetings is driven by the 2003 NASDAQ and NYSE board independence requirements. Post-2003, directors who are relatively new to the firm, busy directors, and directors sitting on different committees significantly gain private information from board meetings. Additional tests support a causal link between board meetings and the smaller information gap between managers and independent directors post 2003.

Author

• Yijing Jiang, Boston University