Director Attention Lowers Equity Costs, Boosts Firm Quality
Independent directors who pay more attention to a company help reduce its cost of equity capital. This means the company can raise money from investors at a lower cost. The quality of the company's financial information also improves when directors focus on it. Directors on the audit committee have the most impact on lowering the cost of equity capital. This shows that when directors pay close attention, they can better monitor the company and improve its financial information, making it more attractive to investors.