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Does the Location of Directors Matter? Information Acquisition and Board Decisions

56 Pages Posted: 18 Mar 2010 Last revised: 28 Jul 2012

Zinat S. Alam

Florida Atlantic University

Mark A. Chen

Georgia State University - Department of Finance

Conrad S. Ciccotello

Daniels College of Business, University of Denver

Harley E. Ryan Jr.

Georgia State University - Department of Finance

Date Written: July 11, 2011

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.

Keywords: Geography, Geographic Distance, Proximity, Board of Directors, Independence, Soft Information, Monitoring, CEO Compensation, Management Turnover

JEL Classification: G30, G34, G39, G29

Suggested Citation

Alam, Zinat S. and Chen, Mark A. and Ciccotello, Conrad S. and Ryan, Harley E., Does the Location of Directors Matter? Information Acquisition and Board Decisions (July 11, 2011). AFA 2011 Denver Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1571862 or http://dx.doi.org/10.2139/ssrn.1571862

Zinat S. Alam

Florida Atlantic University ( email )

Boca Raton, FL 33431
United States

Mark A. Chen (Contact Author)

Georgia State University - Department of Finance ( email )

35 Broad Street
Suite 1230
Atlanta, GA 30303-3083
United States

Conrad S. Ciccotello

Daniels College of Business, University of Denver ( email )

2201 S. Gaylord St
Denver, CO 80208-2685
United States

Harley E. Ryan Jr.

Georgia State University - Department of Finance ( email )

University Plaza
35 Broad Street, Suite 1221
Atlanta, GA 30303-3083
United States
404-651-2674 (Phone)
404-651-2630 (Fax)

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