Is Board Quality an Indicator of a Firm's Future Performance‪?‬

INTRODUCTION The world stock markets have shown extreme volatility in the first nine months of 1998. On August 31 the Dow Jones Industrial Average (DJIA) dropped 512.61 points (6.73%), the largest one-day point drop since October 1997. This came after a week which was the DJIA worst one-week loss in the history of the index. That day the Nasdaq Composite Index dropped to 1499.15, more than 25% off its all time high. The very next day, September 1, the DJIA was up 288.36 points, followed in one week (September 8, 1998) by another 380.53 increase. Stock Exchanges outside the US are also volatile. The stock exchanges in Russia (where the Russian Trading System index plunged 17% in a single day), and Eastern Asia have caused worldwide concern, increasing fears of assets being liquidated in Brazil and Argentina. The European stock markets were down by 17% from their 1998 peaks. In the same week in August when the DJIA had its worst drop, Japan's Nikkei 225 index dropped 9% to below 13915.63, a 12-year low.