Psychological Characteristics of Outside Directors: Their impact on board monitoring and advice and counsel provision

Why and how do the psychological characteristics of outside directors influence their functions, contributing to strategic decision-making? We empirically examine how the psychological characteristics of outside directors influence their engagement in providing expert advice and counsel and exercising oversight and control within the board. Outside directors’ engagement in performing these roles will depend on their psychological characteristics because such factors influence their abilities and motivation to succeed in those roles. Using survey data on 185 outside directors in 155 listed firms in Japan, we found that organizational identification with the focal firm that an outside director is serving, trust toward other outside directors, emotional intelligence, and openness to experience significantly enhanced board monitoring and advice and counsel provision.