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Outside board memberships of CEOs: Expertise or entrenchment?

Author

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  • Balsmeier, Benjamin
  • Buchwald, Achim
  • Peters, Heiko

Abstract

We investigate whether outside board memberships of CEOs signal expertise or entrenchment. The analysis is based on panel data of the largest German companies covering the period from 1996 to 2008. Supporting the entrenchment hypothesis, our analysis reveals that firms having a CEO with one or more outside mandates suffer from significantly weaker firm performance compared with firms having a CEO without any outside board mandates. Moreover, disciplinary CEO turnovers become less likely and turnover-performance sensitivity declines with rising board memberships of the top manager. We conclude that outside mandates enhance managerial power at the expense of the home firm's shareholders.

Suggested Citation

  • Balsmeier, Benjamin & Buchwald, Achim & Peters, Heiko, 2011. "Outside board memberships of CEOs: Expertise or entrenchment?," DICE Discussion Papers 26, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
  • Handle: RePEc:zbw:dicedp:26
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    File URL: https://www.econstor.eu/bitstream/10419/48601/1/663925657.pdf
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Keep CEOs off outside boards
      by Economic Logician in Economic Logic on 2011-08-24 19:25:00

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    Cited by:

    1. Gu, Yiquan & Wenzel, Tobias, 2012. "Transparency, entry, and productivity," Economics Letters, Elsevier, vol. 115(1), pages 7-10.
    2. Buchwald, Achim, 2015. "Competition, outside directors and executive turnover: Implications for corporate governance in the EU," DICE Discussion Papers 174, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    3. Haucap, Justus & Herr, Annika & Frank, Björn, 2011. "In vino veritas: Theory and evidence on social drinking," DICE Discussion Papers 37, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Clémence Christin, 2013. "Entry Deterrence Through Cooperative R&D Over-Investment," Recherches économiques de Louvain, De Boeck Université, vol. 79(2), pages 5-26.
    5. Stühmeier Torben & Wenzel Tobias, 2012. "Regulating Advertising in the Presence of Public Service Broadcasting," Review of Network Economics, De Gruyter, vol. 11(2), pages 1-23, June.
    6. repec:kap:jincot:v:18:y:2018:i:1:d:10.1007_s10842-017-0250-7 is not listed on IDEAS

    More about this item

    Keywords

    Corporate Governance; Entrenchment; Outside Board Memberships; CEO turnover;

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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