Is Director Industry Experience Valuable?

Item Type Journal paper
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.

Authors von Meyerinck, Felix; Oesch, David & Schmid, Markus
Journal or Publication Title Financial Management
Language English
Keywords Board of directors; Director appointments; Director deaths; Director skills and experi-ence; Corporate governance
Subjects business studies
Institute/School s/bf - Swiss Institute of Banking and Finance
HSG Classification contribution to scientific community
Refereed Yes
Date 2016
Publisher Financial Management Association
Place of Publication Tampa
Series Name SoF Working Paper Series
Volume 45
Number 1
Page Range 207-237
Number of Pages 30
ISSN 0046-3892
ISSN-Digital 1755-053X
Publisher DOI 10.1111/fima.12089
Depositing User Prof. Dr. Markus Schmid
Date Deposited 07 Dec 2012 13:44
Last Modified 23 Aug 2016 11:15
URI: https://www.alexandria.unisg.ch/publications/218552

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Citation

von Meyerinck, Felix; Oesch, David & Schmid, Markus (2016) Is Director Industry Experience Valuable? Financial Management, 45 (1). 207-237. ISSN 0046-3892

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https://www.alexandria.unisg.ch/id/eprint/218552
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