Social and Behavioral Sciences Commons^™

What Do Outside Directors Really Do? Evidence From Their Voting Activities, Wonseok Choi, Monika K. Rabarison

Economics and Finance Faculty Publications and Presentations

Prior studies on the monitoring role of outside directors tend to be based on the assumption of interest differences between agents and principals and adhere to arbitrary definitions of board independence or quality. Using a unique dataset of individual outside directors’ voting activities on items proposed by managers of Korean public firms between FY2010 and FY2014, we investigate whether outside directors play an effective role in mitigating agency problems, without such assumption and arbitrary definitions. We find that outside directors can provide effective monitoring by expressing strong dissension, such as disagreeing, withdrawing their votes, or holding their votes on managers’ …