Independent director reputation incentives and stock price informativeness

- Reputation incentives of independent directors positively influence firm transparency.
- High reputation incentives link to greater stock price informativeness.
- They also link to more voluntary disclosures and fewer stock price crashes.
- The results are robust to using exogenous shocks to reputation incentives.

We link the reputation incentives of independent directors to the informativeness of stock prices. We show that when more independent directors rank a directorship high, the firm-specific information content in a firm's stock price increases. Further, independent directors with high reputation incentives serve firms that voluntarily disclose more information and display lower crash risk. We find similar results when using plausibly exogenous shocks to the reputation incentives of independent directors. Our results therefore support a causal interpretation of the positive influence that independent directors with reputation incentives exert on corporate transparency.