Journal of Financial and Quantitative Analysis

Research Articles

Director Ownership, Governance, and Performance

Sanjai Bhagata1 and Brian Boltona2

a1 [email protected], Leeds School of Business, University of Colorado at Boulder, UCB 419, Boulder, CO 80309;

a2 [email protected], School of Business Administration, Portland State University, PO Box 751, Portland, OR 97207.


We study the impact of the Sarbanes-Oxley Act on the relationship between corporate governance and company performance. We consider 5 measures of corporate governance during the period 1998–2007. We find a significant negative relationship between board independence and operating performance during the pre-2002 period, but a positive and significant relationship during the post-2002 period. Our most important contribution is a proposal of a governance measure, namely, dollar ownership of the board members, that is simple, intuitive, less prone to measurement error, and not subject to the problem of weighting a multitude of governance provisions in constructing a governance index.