Journal of Financial and Quantitative Analysis

Research Articles

Director Ownership, Governance, and Performance

Sanjai Bhagata1 and Brian Boltona2

a1, Leeds School of Business, University of Colorado at Boulder, UCB 419, Boulder, CO 80309;

a2, 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.