The Value-Maximizing Board

Abstract

This paper compares board and director characteristics of reverse leveraged buyout (LBO) firms controlled by LBO specialists to those of an industry- and size-matched comparison sample. We consider the boards of the reverse LBOs to be value-maximizing because of the strong incentives the LBO specialists have to structure those boards in a way that maximizes shareholder value. Relative to the comparison firms, we find that the boards of the reverse LBOs are smaller, control larger equity stakes, and meet less frequently. Relative to directors of the comparison firms, directors of the reverse LBOs are younger, have shorter tenures, are less likely to be women, and are at least as likely to serve on other boards.

JEL Classification: L29, M19