Does mandated independence improve firm performance? Evidence from New Zealand

Michelle Li (Department of Accounting and Finance, University of Auckland, Auckland, New Zealand)
Helen Roberts (Department of Accountancy and Finance, University of Otago, Dunedin, New Zealand)

Pacific Accounting Review

ISSN: 0114-0582

Publication date: 5 February 2018



This paper aims to examine the relationship between board independence and firm performance for publicly listed New Zealand (NZ) firms over the period 2004-2016.


To address endogeneity concerns, the relationship between firm performance and board independence is modelled using three different approaches: firm fixed-effect estimation, difference-in-difference estimation and two-stage least squares estimation, while controlling for firm and governance characteristics.


The main finding is that the mandated board independence introduced by the Best Practice Code does not improve operating or market performance for listed NZ firms.

Research limitations/implications

The fact that NZ firms choose greater board independence than required is puzzling. Research examining director characteristics and connectedness, not captured by the NZX Code, may be a fruitful area for future research when disclosure allows.

Practical implications

Regulators may need to review reasons for mandating changes in factors affecting firm governance before implementing further regulations concerning board structure.

Social implications

The findings cast doubt on the benefit of mandated board independence for NZ firms. The results imply that “good” governance practices proposed by regulators are not universal.


This paper tests the impact of mandated board independence following the adoption of the Best Practice Code in 2004 using methodologies that account for endogeneity using 13 years of data.



The authors would like to thank Asheq Rahman (the editor) and two anonymous referees for helpful comments and suggestions. They would like to acknowledge the valuable suggestions made by David Emanuel at the University of Auckland. They would also like to thank to Samuel Struthers for valuable research assistance on earlier versions of this paper.


Li, M. and Roberts, H. (2018), "Does mandated independence improve firm performance? Evidence from New Zealand", Pacific Accounting Review, Vol. 30 No. 1, pp. 92-109.

Download as .RIS



Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

To read the full version of this content please select one of the options below

You may be able to access this content by logging in via Shibboleth, Open Athens or with your Emerald account.
To rent this content from Deepdyve, please click the button.
If you think you should have access to this content, click the button to contact our support team.