Local Director Talent and Board Composition

74 Pages Posted: 15 Jul 2010 Last revised: 25 Mar 2013

See all articles by Anzhela Knyazeva

Anzhela Knyazeva

Independent; New York University (NYU) - Leonard N. Stern School of Business

Diana Knyazeva

Independent

Ronald W. Masulis

University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN); National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER)

Multiple version iconThere are 3 versions of this paper

Date Written: November 10, 2010

Abstract

This study explores the effects of local director labor markets on the board structure of nearby firms. We examine whether firms are able to attract more independent directors to their boards when a larger pool of prospective directors (officers and directors of other firms, financial institutions and universities) is located near the firm’s headquarters. Empirically, firms close to large pools of prospective directors have more independent boards and more independent directors with executive expertise. Moreover, proximity to a larger pool of directors with technology and R&D experience is associated with more directors with such specialized expertise on the firm’s board. Further, firms located close to financial institutions and universities attract more directors with financial and academic expertise, respectively. Similarly, firms are able to hire more independent directors whose past experience matches the firm’s growth options if a larger local pool of such directors is available. Finally, we use our findings on director labor market determinants of board composition to reexamine the relation between board independence and firm value.

Keywords: board of directors, director labor market, location, firm value

JEL Classification: G30, G34

Suggested Citation

Knyazeva, Anzhela and Knyazeva, Diana and Masulis, Ronald W., Local Director Talent and Board Composition (November 10, 2010). 23rd Australasian Finance and Banking Conference 2010 Paper. Available at SSRN: https://ssrn.com/abstract=1640323 or http://dx.doi.org/10.2139/ssrn.1640323

Anzhela Knyazeva (Contact Author)

Independent ( email )

No Address Available

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
Suite 9-160
New York, NY NY 10012
United States

Diana Knyazeva

Independent ( email )

No Address Available

Ronald W. Masulis

University of New South Wales - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

National University of Singapore (NUS) - Asian Bureau of Finance and Economic Research (ABFER) ( email )

BIZ 2 Storey 4, 04-05
1 Business Link
Singapore, 117592
Singapore

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