Board Seat Accumulation by Executives: A Shareholder's Perspective

Abstract

While reformers have argued that multiple directorships for executives can destroy value, we investigate firms with executives that accept an outside directorship and find negative announcement returns only when the executive's firm has greater agency problems. When fewer agency concerns exist, additional directorships relate to increased firm value. Announcement returns are also higher when executives accept an outside directorship in a financial, high-growth, or related-industry firm. Our results suggest that outside directorships for executives can enhance firm value, which has important implications for firms employing executives nominated for outside boards and for policy recommendations restricting the number of directorships. Copyright 2005 by The American Finance Association.

Interlocking directorships and firm performance in highly regulated sectors: the moderating impact of board diversity

“…When the level of interlocking is high, the need to reconcile a number of board appointments compromises directors' ability to contribute sufficient time and attention to the monitoring and service roles of the focal company board (Fich and Shivdasani, 2006;Perry and Peyer, 2005). This finding is in line with the agency theory-based view of interlocking (Eisenhardt, 1989;Fama and Jensen, 1983), which points to the problem of busyness, rather than the resource-dependence view (Pfeffer, 1972;Pfeffer and Salancik, 1978) which suggests the benefits of interlocking in terms of improved inter-organisational coordination and uncertainty reduction.…”

Does Corporate Governance Affect Target IPO Bank Returns Surrounding M&A Announcements

“…Reference [14] illustrates negative stock market reaction to the announcement of inside director appointments; [11] documents a negative relationship between returns surrounding M&A announcements and lack of board independence. In contrast, [13] demonstrates positive stock price reaction to the selection of outside directors; [2] attributes high target gains to boards dominated by outside directors and aruges that the dominance empowers and motivates the board to effectively govern the management group.…”

“…Reference [11] links negative returns surrounding M&A announcements to low D&O ownership as well as lack of board independence. Reference [2] claims that significant board director ownership and board dominance by outside directors increase the board's ability and incentives to monitor and discipline managers.…”

Horizontal and Vertical Firm Networks, Corporate Performance and Product Market Competition

“…This is the case if directors with multiple board positions face conflicts of interest. For instance, the directors might have incentives to accept a rather high number of parallel board mandates (Conyon and Read 2006, Fich and Shivdasani 2006, Perry and Peyer 2005 to maximize self interest (Fahlenbrach et al 2010). Further, conflicts of interest can occur between sending and receiving firms (e.g., Dittmann et al 2010 in the case of representatives from financial firms).…”