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research article

Why do firms appoint CEOs as outside directors?

Fahlenbrach, Ruediger  
•
Low, Angie
•
Stulz, Rene M.
2010
Journal Of Financial Economics

Companies actively seek to appoint outside CEOs to their boards. Consistent with our matching theory of outside CEO board appointments, we show that such appointments have a certification benefit for the appointing firm. CEOs are more likely to join boards of large established firms that are geographically close, pursue similar financial and investment policies, and have comparable governance to their own firms. The first outside CEO director appointment has a higher stock-price reaction than the appointment of another outside director. Except for a decrease in operating performance following the appointment of an interlocked director, CEO directors do not affect the appointing firm's operating performance, decision-making, and CEO compensation.

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Type
research article
DOI
10.1016/j.jfineco.2010.01.003
Web of Science ID

WOS:000277944300002

Author(s)
Fahlenbrach, Ruediger  
Low, Angie
Stulz, Rene M.
Date Issued

2010

Publisher

Elsevier

Published in
Journal Of Financial Economics
Volume

97

Start page

12

End page

32

Subjects

Director independence

•

New director appointment

•

Director influence

•

Interlocked boards

•

Governance

•

Corporate Governance

•

Shareholder Wealth

•

Board Composition

•

Performance

•

Compensation

•

Incentives

•

Determinants

•

Portfolios

•

Reputation

•

Ownership

Editorial or Peer reviewed

REVIEWED

Written at

EPFL

EPFL units
SFI-RF  
Available on Infoscience
October 27, 2010
Use this identifier to reference this record
https://infoscience.epfl.ch/handle/20.500.14299/56193
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