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

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  • Anil Shivdasani

    (Kenan-Flagler Business School, University of North Carolina, Chapel Hill,)

  • David Yermack

    (Stern School of Business, New York University)

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.

Suggested Citation

  • Anil Shivdasani & David Yermack, 1999. "CEO Involvement in the Selection of New Board Members: An Empirical Analysis," Journal of Finance, American Finance Association, vol. 54(5), pages 1829-1853, October.
  • Handle: RePEc:bla:jfinan:v:54:y:1999:i:5:p:1829-1853
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