Matching Directors with Firms: Evidence from Board Structure Following Corporate Spinoffs

Abstract:     
We analyze board structure surrounding corporate spinoffs. Our findings indicate that there are substantial differences in the composition of the boards of spun off units and post-spinoff corporate parents. There is little overlap in the two boards and the majority of the unit directors have no prior connection to the parent company. Placement on either the parent or unit board is strongly associated with a director having expertise that is unique to that firm’s industry. These findings are consistent with the spinoff allowing the parent and unit firms to tailor their boards to the specific assets and operating needs of their firms. We also find that pre-spinoff parent board ties between individual directors and the CEO have a meaningful impact on the composition of both the parent and the unit board.

Number of Pages in PDF File: 46

Keywords: Board of directors, spinoffs, governance

JEL Classification: G34

working papers series