Busy directors and firm performance: Evidence from mergers.

摘要

The first chapter of this dissertation studies whether director appointments to multiple boards impact firm outcomes. To overcome the endogeneity of the number of board appointments, I exploit variation generated by mergers that terminate entire boards. These mergers reduce board appointments of the dismissed directors and are thus used as a negative shock to their workload. I find that a reduction in director workload is associated with higher earnings, higher market to book ratios, and higher pay-performance sensitivity in CEO compensation contracts. Consistent with the hypothesis that director workload matters, the performance gains are particularly stark when directors are geographically far from firm headquarters, and when marginal value of directors' time and effort is high. In addition, directors are more likely to join board committees after losing seats on other boards, suggesting that they are able to devote more time to remaining boards. Finally, I find a similar effect on incumbent CEOs who hold additional board appointments.;The second chapter of this dissertation asks whether the protection from reelection votes provided to independent directors in staggered board is beneficial or detrimental to board effectiveness. Since directors on staggered boards are appointed for multi-year terms, they are protected from removal in the following (couple of) annual meetings. However, the theory is ambivalent about the value of such protection, providing arguments both against and in its favor. I use predetermined reelection schedules as an exogenous source of variation to measure the effect of that protection. The findings are consistent with the view that protection has a detrimental effect on board decisions. When protection is low (i.e. relatively large fraction of independent directors coming up for reelection) firms tend to announce more profitable merger and acquisition transactions, and tend to impose CEO contracts that exhibit stronger alignment between CEO and shareholder objectives. As the average protection of independent directors increases, these board decisions tend to be less favorable. In addition, independent directors are more likely to join board committees on years in which their directorship horizon is long.