Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments May 17, 2023 erstellt
Description:
Purpose: Exploiting a novel measure of innovation, we investigate whether independent directors improve innovation efficiency. This novel measure of innovation captures the extent to which the firm generates revenue from its R&D and is therefore more economically meaningful. We also employ a text-based measure of innovation. Design/Methodology: We rely on a quasi-natural experiment based on the passage of the Sarbanes-Oxley Act of 2002 that compelled certain firms to raise board independence. Our difference-in-difference analysis is far less vulnerable to endogeneity and is more likely to show a causal influence, rather than a mere association. Findings: Our results show that more independent directors improve innovation efficiency significantly. Specifically, firms forced to raise board independence experienced a much higher increase in innovation than those not required to change their board composition. We also explore another novel measure of innovation, a text-based metric of innovation. Originality: Our research is original in several ways. First, we take advantage of an exogenous regulatory shock as a quasi-natural experiment. This approach is far less susceptible to endogeneity. Second, we employ a novel measure of innovation efficiency, i.e., research quotient, which is more economically meaningful. Finally, we utilize a unique measure of innovation derived from powerful textual analysis