In the paper, Board Structure and Monitoring: New Evidence from CEO Turnover, which was recently made publicly available on SSRN, we provide new evidence on the potential benefits of SOX and ensuing new exchange listing rules and the effectiveness of monitoring by independent directors. Although many researchers, regulators and investors believe that increasing the representation of independent directors on corporate boards can improve quality of board oversight, empirical evidence has been mixed and inconclusive. Recent research even raises doubt about the effectiveness of independent directors in monitoring CEOs.

Using the change in NYSE and Nasdaq listing rules following the passage of the Sarbanes-Oxley Act as a source of exogenous variation, we provide the first statistically convincing evidence on a causal relation between board (committee) independence and the sensitivity of forced CEO turnover to firm performance. Specifically, we find that firms that after SOX moved to a majority of independent directors or to a fully independent nominating committee experience increased sensitivity of forced CEO turnover to performance. This evidence suggests that quality of board monitoring is positively related to board independence and nominating committee independence and the causation goes from board structure to quality of board monitoring.

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