Accounting for Taste: Board Member Preferences and Corporate Policy Choices
Scott A. Richardson
London Business School; AQR Capital Management, LLC
A. Irem Tuna
London Business School
Peter D. Wysocki
University of Miami - School of Business Administration
MIT Sloan Working Paper No. 4307-03
This paper explores whether firms that share common directors also pursue similar corporate policies. Using a sample of 885 U.S. firms with common directors, we find that director fixed effects strongly explain variation in firms' governance, financial, disclosure, and strategic policy choices. Moreover, the director fixed effects provide incremental explanatory power over traditional economic determinants of firms' policies. consistent with our hypotheses, the director effects are less pronounced in large firms, in firms with more outside board members, and for directors with numerous outside board appointments. Our evidence is more consistent with directors and firms "matching" their policy preferences rather than directors "imposing" their policy preferences on firms.
Number of Pages in PDF File: 45
Keywords: Board of Directors, Corporate Governance, Corporate Policies, Disclosure
JEL Classification: D21, G34, M41, M45
Date posted: May 8, 2003
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