The Finance Committee of the Board and Financial Performance: A Resource Dependence Perspective

This study examines whether properly staffed board-level finance committees improve firm performance. Using a sample of US firms, directors are categorized using resource dependence taxonomy. Hypotheses related to firm performance are formulated and metrics including accounting measures, stock market performance, and long-term investments tested. There is some support that firms with a finance committee showed greater Jensen productivity measures. The evidence also suggests that finance committees are most effective in improving performance when staffed with top management from publicly traded companies and investment or commercial bankers. Consistent with others, we find little association between firm performance and overall board composition.