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

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  • Anil Shivdasani
  • David Yermack

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, and independent appointees are more likely to serve on large numbers of other boards, a practice disfavored by investor activists. 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.

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Bibliographic Info

Paper provided by New York University, Leonard N. Stern School of Business- in its series New York University, Leonard N. Stern School Finance Department Working Paper Seires with number 98-059.

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Date of creation: May 1998
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Handle: RePEc:fth:nystfi:98-059

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Postal: U.S.A.; New York University, Leonard N. Stern School of Business, Department of Economics . 44 West 4th Street. New York, New York 10012-1126
Phone: (212) 998-0100
Web page: http://w4.stern.nyu.edu/finance/
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