Is Director Industry Experience Valuable?
Journal
Financial Management
Series
SoF Working Paper Series
ISSN
0046-3892
ISSN-Digital
1755-053X
Type
journal article
Date Issued
2016
Author(s)
Abstract
We investigate whether investor reactions to the announcement of a new outside director appointment significantly depend upon the director's experience in the appointing firm's industry. Our sample includes 688 outside director appointments to boards of S&P 500 companies from 2005 to 2010. We find significantly higher announcement returns upon appointments of experienced versus inexperienced directors. To alleviate endogeneity concerns, we use the deaths of 200 directors holding 280 outside directorships as an identification strategy and find significantly more negative announcement returns associated with the deaths of experienced versus inexperienced directors. However, while our results are robust to accounting for time-fixed unobservable director and firm characteristics, we still cannot completely rule out endogenous firm-director matching driving our results.
Language
English
Keywords
Board of directors
Director appointments
Director deaths
Director skills and experi-ence
Corporate governance
HSG Classification
contribution to scientific community
Refereed
Yes
Publisher
Financial Management Association
Publisher place
Tampa
Volume
45
Number
1
Start page
207
End page
237
Pages
30
Subject(s)
Division(s)
Eprints ID
218552
File(s)![Thumbnail Image]()
open.access
Name
12_17_Schmid et al_Is Director Industry Experience Valuable.pdf
Size
795.8 KB
Format
Adobe PDF
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