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Director Characteristics and Firm Performance

Author

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  • Christophe Volonté

    () (University of Basel)

Abstract

The traditional methodology examining optimal boards relates a simple board variable (e.g. independence or board demography) to firm performance, however, ig- noring other board characteristics. This paper investigates how the education and business experience of directors affect firm performance. The sample consists of 1,574 directorships from 224 listed firms in Switzerland. Using OLS and including control variables, the results show that graduates of minor Swiss universities are negatively related to Tobin's Q, and industrial knowledge and Tobin's Q are nega- tively correlated if the firm has more divisions. In addition, director fixed effects (or unobserved characteristics) are significant, but improve the explanatory power of the models only by 5 percent.

Suggested Citation

  • Christophe Volonté, 2011. "Director Characteristics and Firm Performance," Working papers 2011/11, Faculty of Business and Economics - University of Basel.
  • Handle: RePEc:bsl:wpaper:2011/11
    as

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    File URL: https://wwz.unibas.ch/uploads/tx_x4epublication/Discupaper_Volonte_Characteristics.pdf
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    References listed on IDEAS

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    1. Bruce Johnson, W. & Magee, Robert P. & Nagarajan, Nandu J. & Newman, Harry A., 1985. "An analysis of the stock price reaction to sudden executive deaths : Implications for the managerial labor market," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 151-174, April.
    2. Robert Neumann & Torben Voetmann, 2005. "Top executive turnovers: Separating decision and control rights," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 25-37.
    3. Xin Chang & Sudipto Dasgupta & Gilles Hilary, 2006. "Analyst Coverage and Financing Decisions," Journal of Finance, American Finance Association, vol. 61(6), pages 3009-3048, December.
    4. Jay Dahya & A. Alasdair Lonie & David M. Power, 1998. "Ownership Structure, Firm Performance and Top Executive Change: An Analysis of UK Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 25(9-10), pages 1089-1118.
    5. Dirk Jenter & Fadi Kanaan, 2015. "CEO Turnover and Relative Performance Evaluation," Journal of Finance, American Finance Association, vol. 70(5), pages 2155-2184, October.
    6. Corrado, Charles J., 1989. "A nonparametric test for abnormal security-price performance in event studies," Journal of Financial Economics, Elsevier, vol. 23(2), pages 385-395, August.
    7. Denis, David J & Denis, Diane K, 1995. " Performance Changes Following Top Management Dismissals," Journal of Finance, American Finance Association, vol. 50(4), pages 1029-1057, September.
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    Cited by:

    1. Xu, Hongmei, 2013. "How much do the characteristics of independent directors and supervisory board members affect firm performance in China?," Discussion Papers of the Institute for Organisational Economics 12/2013, University of Münster, Institute for Organisational Economics.

    More about this item

    Keywords

    Corporate governance: Board of directors; Director characteristics; Education and business experience;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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