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Does the Location of Directors Matter? Information Acquisition and Board DecisionsZinat S. AlamFlorida Atlantic University Mark A. ChenGeorgia State University - Department of Finance Conrad S. CiccotelloGeorgia State University - Department of Finance Harley E. Ryan Jr.Georgia State University - Department of Finance July 11, 2011 AFA 2011 Denver Meetings Paper Abstract: Using data on over 4,000 individual residential addresses, we find that geographic distance between directors and corporate headquarters is related to information acquisition and board decisions. The fraction of a board’s unaffiliated directors who live near headquarters is higher when information-gathering needs are greater. When the fraction of unaffiliated directors living near headquarters is lower, non-routine CEO turnover is more sensitive to stock performance. Also, the level, intensity, and sensitivity of CEO equity-based pay increase with board distance. Overall, our results suggest that geographic location is an important dimension of board structure that influences directors’ costs of gathering information.
Number of Pages in PDF File: 56 Keywords: Geography, Geographic Distance, Proximity, Board of Directors, Independence, Soft Information, Monitoring, CEO Compensation, Management Turnover JEL Classification: G30, G34, G39, G29 working papers seriesDate posted: March 18, 2010 ; Last revised: July 28, 2012Suggested CitationContact Information
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