Non-executive directors' behaviour and activities, and firm performance

The chapter addresses the two most significant gaps in knowledge about the role and effectiveness of non-executive directors (NEDs). One relates to the likely impact of their activities on firm performance. The chapter applies the findings from empirical research on the direct outcomes of NEDs' disparate activities to analyse the likely mechanisms by which these might impact firm performance. The aim is to encourage research to reorient itself to study these channels empirically. The other major gap in knowledge concerns the antecedents to NEDs' behaviour. An extensive analytic framework is presented using behavioural theory and available evidence on causal factors to allow this gap to be addressed. A suitable research methodology is also proposed. The aim is to provide a roadmap to advance knowledge on the generative mechanisms underlying NEDs' behaviour and consequently their effectiveness. Such knowledge is crucial for guiding policy formulations in the field of corporate governance.