Empirical evidence on the relations between board independence and board decisions and firm performance is generally confounded by serious endogeneity issues. We circumvent these endogeneity problems by demonstrating the strong impact of the local director labor market on board composition....

While the fraction of independent directors has been widely used as a proxy for monitoring effectiveness of the board, there are no clear-cut measures that capture the advising effectiveness of the board. We develop and validate two new measures of board advising: (i) per-outside-director...