Peter Swan, of the University of NSW, said company performance declined significantly when non-independent directors departed boards to make way for independents, a requirement of the ASX Corporate Governance Council.

The research was disputed by the Australian Institute of Company Directors and the ASX, which questioned Professor Swan’s methodology and maintained that boards with a majority of independent directors safeguarded investors.

Institutional investors said the research should not be dismissed.

Pointing to the success of Ramsay Health Care under a non-independent board and underperformance of retailer Metcash since it moved towards an independent one, Investors Mutual portfolio manager Hugh Giddy said that, on a case-by-case basis, he sometimes ignored the corporate governance guidelines when investing.

"Where I feel a company is looking after the interests of shareholders, I don't vote against the election of directors who are not independent," he said. "Often I find some of the best companies have boards that don’t pass muster on perfect governance."

Since 2003, the governance council has required all listed companies to adopt a majority of "independent" board members – defined as those with no links either to management or to substantial shareholders – or explain "if not, why not".

The Australian Prudential Regulatory Authority requires all financial firms to adopt the rules as a matter of law.

The US requires independence but is explicit in stating that this can be achieved while maintaining a significant shareholding.

Bob Austin, the head of the corporate HQ advisory team at Minter Ellison, said the council should change the definition of independence in line with the US.

"It is time for the Corporate Governance Council to revisit the definition of independence, and to make adjustments designed to permit, and indeed, encourage, independent directors to have more skin in the game," he said.

Professor Swan's research finds non-independent directors make better acquisition decisions, increase the proportion of incentives in CEO pay and raise dividend payouts. Directors who are significant shareholders reduce CEO pay, increase the sensitivity of CEO turnover to performance and raise the firm’s level of performance.

In contrast, independent directors had negligible stakes in a business which "diminishes any intrinsic incentive to monitor that the independent director may possess", Professor Swan said.

Many independent directors had no specific knowledge or background in the industry and their part-time nature meant that acquisition of such information was difficult.

"We estimate the cost of the performance decline to be $30.7 to $51.6 billion over the period 2002-2012 in the form of destruction of shareholder value for our sample of large firms," the study concludes.

Poor takeover decisions after non-independent directors departed account for $10 billion of the losses.

The Australian Institute of Company Directors criticised the findings. Spokesman Steve Burrell said the destruction of shareholder value during the period of the study would have taken place "regardless of the composition of boards" because some mining companies with non-independent boards benefited from the mining boom while large banks that moved to majority independent boards quickly suffered during the financial crisis.

"We are not necessarily opposed to directors having more skin in the game, but we are arguing that independence has real value," he said. "Methodologically we have big question about the conclusions Peter Swan draw and we certainly question the estimates of the so-called value lost.

"We would also suggest it goes against the view of just about every investor group and corporate governance group in the country."

Professor Swan presented the paper, "Does Board Independence Destroy Corporate Value?", to the Law Council of Australia’s corporations law workshop on the Gold Coast on the weekend.

It was co-written with David Forsberg, also of the School of Banking and Finance at the Australian School of Business at UNSW. The authors say it represents the first independent attempt to evaluate the requirement for a majority of board members to be independent.

They argue their findings raise serious questions about the intellectual basis of the independence requirements, which "do not seem to be based on any quantitative research into the likely effects of the rules".

"Nor after these rules have been in place for over a decade, does the ASX CGC appear to have even asked simple questions about what their rules may have actually have achieved," they continued.

"Was shareholder wealth actually created or destroyed? The council has never suggested that their rules and recommendations are based on any quantitative analysis or have benefited from data analysis or even purview of the literature."

ASX chief compiance officer Kevin Lewis said Professor Swan’s views "have not found favour with investor groups, including those represented on the [governance] council".

"Not all things can be measured in terms of returns to shareholders," he said. "Globally, most investor groups strongly and consistently endorse the position that boards should be comprised of a majority of independent directors."

Professor Swan suggested the governance council had been wrong when suggesting its independence rules adhered to international practice.

"Would the 21 groups making up the council wish to put their reputations on the line if they knew they were simply adding to the destruction of shareholder value on a massive scale?" his paper asked.

"Moreover, the claim made by the ASX Governance Council that their recommendations represent 'international best practice' seems to be misleading."