Are Some Outside Directors Better than Others? Evidence from Director Appointments by Fortune 1000 Firms

I analyze 1,493 first‐time director appointments toFortune1000 boards, during 1997–99, to investigate whether certain outside directors are better than others. Reactions to director appointments are higher when appointees are CEOs of other companies than when they are not. CEOs are more likely to ob...

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Bibliographic Details
Published in:The Journal of business (Chicago, Ill.) Ill.), 2005-09, Vol.78 (5), p.1943-1972
Main Author: Fich, Eliezer M.
Format: Article
Language:English
Subjects:
Abnormal returns
Boards of directors
Business structures
Chief executive officers
Commercial banks
Corporate governance
Finance companies
Hypotheses
Investment advisors
Investors
Labor market
Outside directors
Perceptions
Proxy reporting
Proxy statements
Retirement age
Shareholders
Stockholders
Strategic management
Studies
Citations: Items that cite this one
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Summary:I analyze 1,493 first‐time director appointments toFortune1000 boards, during 1997–99, to investigate whether certain outside directors are better than others. Reactions to director appointments are higher when appointees are CEOs of other companies than when they are not. CEOs are more likely to obtain outside directorships when the companies they head perform well. Well‐performing CEOs are also more likely to gain directorships in organizations with growth opportunities. Because, for these firms, a large portion of their value hinges upon realizing their growth potential, I conclude that CEOs are sought as outside directors to enhance firm value.
ISSN:0021-9398
1537-5374
DOI:10.1086/431448