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We are advertis’d by our loving friends: CEO‐connected directors

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  • Junho Park

Abstract

This study examines the effect of CEO‐connected directors on firm value. Empirical analyses are conducted on US firms between 1999 and 2016 using a local supply of directors as an instrumental variable. CEO‐connected directors contribute to the firm by resolving information asymmetry. I find that firms with more CEO‐connected directors produce more innovative outputs than those with fewer CEO‐connected directors. However, such directors exacerbate managerial entrenchment. Hence, it is necessary to establish rules for the board of directors that reflect firm‐specific characteristics, such as information transparency.

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  • Junho Park, 2022. "We are advertis’d by our loving friends: CEO‐connected directors," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(3), pages 3189-3238, September.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:3:p:3189-3238
    DOI: 10.1111/acfi.12885
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