Are Some Outside Directors Better than Others? Evidence from Director Appointments by Fortune 1000 Firms

Abstract:     
I analyze 1,493 first-time director appointments to the boards of Fortune 1000 firms during 1997-1999, to investigate whether certain outside directors are better than others. I find that investor reactions to director appointments are significantly higher when appointees are CEOs of other firms than when they are not. I also find that CEOs of other companies are more likely to become outside directors in organizations with considerable growth opportunities. Because for these firms a large portion of their value hinges upon realizing their growth potential, I conclude that CEOs of other firms are sought in order to enhance firm value.

Number of Pages in PDF File: 43

Keywords: Outside directors, event-study, Fortune 1000, growth opportunities

JEL Classification: G32, G34, J33, L22

Accepted Paper Series