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The Unbalanced Matching in a Director Market

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  • Changmin Lee

    () (Indiana University Bloomington)

Abstract

I construct an intertemporal searching model ("take it or leave it offer") in a frictional directorship market to explain the unbalanced matching between the director and the firm. In this model, potential candidates for outside directors and firms have heterogeneous (also, well ordered) quality levels. Also, both parties have strictly ordered preferences over the quality of counterpart from high levels to low levels. A candidate considers his quality ranking to compare the value of accepting a favorite offer at present to the value of waiting for successful matching with a better offer in the future. My model suggests that that highly qualified candidates would be likely to be matched with bad (not too bad) firms. The best candidate could go to the 150th ranked firm over 250 firms under the uniform distribution for the quality of the firm, and the 140th ranked firm under the extreme value distribution.

Suggested Citation

  • Changmin Lee, 2007. "The Unbalanced Matching in a Director Market," Caepr Working Papers 2007-012, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
  • Handle: RePEc:inu:caeprp:2007012
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    File URL: http://www.iub.edu/~caepr/RePEc/PDF/2007/CAEPR2007-012.pdf
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    References listed on IDEAS

    as
    1. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, Oxford University Press, vol. 123(1), pages 49-100.
    2. J. J. McCall, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, Oxford University Press, vol. 84(1), pages 113-126.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Corporate Governance; Board of Directors; Matching Model; Job Search;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • J41 - Labor and Demographic Economics - - Particular Labor Markets - - - Labor Contracts
    • J44 - Labor and Demographic Economics - - Particular Labor Markets - - - Professional Labor Markets and Occupations
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search

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