Independent director attention and the cost of equity capital

Henry He Huang, Chong Wang, Hong Xie, Jian Zhou

Research output: Contribution to journalArticlepeer-review

5 Scopus citations


We study the relation between independent director attention and the cost of equity capital. Masulis and Mobbs find that a director with multiple directorships distributes her time and effort (i.e., attention) unequally according to the relative prestige of each directorship. We investigate whether a firm's cost of equity capital reflects such unequal distribution of attention by its directors. We find that firms receiving more director attention are associated with a lower cost of equity capital. These firms also have higher accounting information quality. Moreover, the attention from audit committee directors matters more than that from other directors in reducing the cost of equity capital. Robustness checks show that the results are not driven by firm size. Overall, our evidence is consistent with director attention reducing the cost of equity capital through effective monitoring that increases accounting information quality.

Original languageEnglish
Pages (from-to)1468-1493
Number of pages26
JournalJournal of Business Finance and Accounting
Issue number7-8
StatePublished - Jul 1 2021

Bibliographical note

Funding Information:
The authors thank Brian Rountree (editor), an anonymous reviewer, Brian Bratten, Nicole Jenkins, Jeff Payne, Dan Stone, David Ziebart, and workshop participants at the University of Kentucky for their valuable comments and suggestions.

Publisher Copyright:
© 2021 John Wiley & Sons Ltd


  • board monitoring
  • cost of equity capital
  • director attention
  • independent director

ASJC Scopus subject areas

  • Accounting
  • Business, Management and Accounting (miscellaneous)
  • Finance


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