DO INDEPENDENT BOARDS BEHAVE DIFFERENTLY? EXAMINING THE VOLUNTARY ADOPTION OF BOARD MONITORING MECHANISMS

We ask whether firms with an independent board of directors are more likely than firms without an independent board to adopt recommended corporate governance practices designed to enhance the board's monitoring capabilities. Using hand-collected data from Canadian firms listed on both American and Canadian stock exchanges, we find that firms with both types of boards voluntarily adopt corporate governance practices and that independent boards are no more likely to adopt these practices than their non-independent counterparts. One exception to this statement is the formation of board committees. When boards are independent, the audit and compensation committees are far more likely to be staffed exclusively with independent directors. For other voluntary governance practices, the board's ability to adopt recommended practices is sensitive to the presence of a controlling shareholder.