Too Much of a Good Thing? Board Independence and the Value of Initial Public Offerings

Building on agency and resource dependence theories, we study the relationship between the value of initial public offerings and the extent of board independence, which we find to be an inverted U-shape: beyond a certain threshold, board independence becomes excessive. Consistent with agency theory, the inverted U-shaped relationship is more pronounced when ownership and control rights are separated. Consistent with resource dependence theory, the inverted U-shaped relationship is more pronounced in companies with higher industry diversification and less pronounced when the roles of the CEO and president of the board of directors are separated.