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CEO Involvement in the Selection of New Board Members: An Empirical Analysis

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Author Info
Anil Shivdasani (Kenan-Flagler Business School, University of North Carolina, Chapel Hill,)
David Yermack (Stern School of Business, New York University)

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Abstract

We study whether CEO involvement in the selection of new directors influences the nature of appointments to the board. When the CEO serves on the nominating committee or no nominating committee exists, firms appoint fewer independent outside directors and more gray outsiders with conflicts of interest. Stock price reactions to independent director appointments are significantly lower when the CEO is involved in director selection. Our evidence may illuminate a mechanism used by CEOs to reduce pressure from active monitoring, and we find a recent trend of companies removing CEOs from involvement in director selection. Copyright The American Finance Association 1999.

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Publisher Info
Article provided by American Finance Association in its journal The Journal of Finance.

Volume (Year): 54 (1999)
Issue (Month): 5 (October)
Pages: 1829-1853
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Handle: RePEc:bla:jfinan:v:54:y:1999:i:5:p:1829-1853

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  2. Eliezer M. Fitch & Lawrence J. White, 2001. "Why Do CEO's Reciprocally Sit On Each Other's Boards?," Working Papers 01-03, New York University, Leonard N. Stern School of Business, Department of Economics. [Downloadable!]
  3. Renée Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2008. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," NBER Working Papers 14486, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  4. Carretta, Alessandro & Farina, Vincenzo & Schwizer, Paola, 2006. "Evaluating the board of directors of financial intermediaries: competencies, effectiveness and performance," MPRA Paper 8299, University Library of Munich, Germany. [Downloadable!]
  5. David Yermack, 2006. "Board Members and Company Value," Financial Markets and Portfolio Management, Springer, vol. 20(1), pages 33-47, April. [Downloadable!] (restricted)
  6. Ghosh, Saibal, 2007. "Board Diligence, Director Busyness and Corporate Governance: An Empirical Analysis for India," Review of Applied Economics, Review of Applied Economics, vol. 3(1-2). [Downloadable!]
  7. Sharad Asthana & Steven Balsam, . "Determinants Of Outside Director Turnover," Working Papers 0023, College of Business, University of Texas at San Antonio. [Downloadable!]
  8. Lily Qiu, 2005. "Managerial Reputation Concerns, Outside Monitoring, and Investment Efficiency," Working Papers 2005-08, Brown University, Department of Economics. [Downloadable!]
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  11. Jayati Sarkar & Subrata Sarkar, 2005. "Multiple board appointments and firm performance in emerging economies: Evidence from India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2005-001, Indira Gandhi Institute of Development Research, Mumbai, India. [Downloadable!]
  12. Zhilan Feng & Chinmoy Ghosh & C. Sirmans, 2007. "CEO Involvement in Director Selection: Implications for REIT Dividend Policy," The Journal of Real Estate Finance and Economics, Springer, vol. 35(4), pages 385-410, November. [Downloadable!] (restricted)
  13. Randall Morck, 2009. "Generalized Agency Problems," NBER Working Papers 15051, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Zhilan Feng & Chinmoy Ghosh & C. Sirmans, 2007. "Director Compensation and CEO Bargaining Power in REITs," The Journal of Real Estate Finance and Economics, Springer, vol. 35(3), pages 225-251, October. [Downloadable!] (restricted)
  15. Urbi Garay & Maximiliano González, 2005. "CEO and Director Turnover in Venezuela," RES Working Papers 3214, Inter-American Development Bank, Research Department. [Downloadable!]
  16. Fahlenbrach, Rudiger & Low, Angie & Stulz, Rene, 2008. "Why Do Firms Appoint CEOs as Outside Directors?," Working Paper Series 2008-10, Ohio State University, Charles A. Dice Center for Research in Financial Economics. [Downloadable!]
  17. Vagliasindi, Maria, 2008. "The effectiveness of boards of directors of state owned enterprises in developing countries," Policy Research Working Paper Series 4579, The World Bank. [Downloadable!]
  18. Taylor, Svetlana M., 2007. "The Impact of the Cadbury Committee Recommendations on Analysts' Earnings Forecasts: UK Evidence," Cardiff Accounting and Finance Working Papers A2007/2, Cardiff University, Cardiff Business School, Accounting and Finance Section. [Downloadable!]
  19. Yeh, Yin-Hua & Woidtke, Tracie, 2004. "Commitment or Entrenchment?: Controlling Shareholders and Board Composition," CEI Working Paper Series 2004-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University. [Downloadable!]
  20. Randall Morck, 2008. "Behavioral finance in corporate governance: economics and ethics of the devil’s advocate," Journal of Management and Governance, Springer, vol. 12(2), pages 179-200, May. [Downloadable!] (restricted)
  21. Hess, David & Impavido, Gregorio, 2003. "Governance of public pension funds : lessons from corporate governance and international evidence," Policy Research Working Paper Series 3110, The World Bank. [Downloadable!]
  22. Igor Filatotchev & Yung-Chih Lien & Jenifer Piesse, 2005. "Corporate Governance and Performance in Publicly Listed, Family-Controlled Firms: Evidence from Taiwan," Asia Pacific Journal of Management, Springer, vol. 22(3), pages 257-283, September. [Downloadable!] (restricted)
  23. Rommens A. & Cuyvers L. & Deloof M., 2007. "Interlocking Directorates and Business Groups: Belgian Evidence," Working Papers 2007023, University of Antwerp, Faculty of Applied Economics. [Downloadable!]
  24. Antonio Mínguez & Juan Francisco Martín Ugedo, 2005. "La Influencia Del Poder De La Direccion En El Riesgo Y En El Valor De La Empresa: Evidencia Para El Mercado Español," Working Papers. Serie EC 2005-13, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie). [Downloadable!]
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