Professors in the Boardroom and their Impact on Corporate Governance and Firm Performance

Financial Management, Forthcoming

55 Pages Posted: 28 Feb 2013 Last revised: 11 Jun 2014

See all articles by Bill Francis

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology

Iftekhar Hasan

Fordham University - Gabelli School of Business; Bank of Finland

Qiang Wu

Rensselaer Polytechnic Institute (RPI) - Lally School of Management

Multiple version iconThere are 3 versions of this paper

Date Written: February 28, 2013

Abstract

Directors from academia served on the boards of around 40% of S&P 1,500 firms over the 1998–2011 period. This paper investigates the effects of academic directors on corporate governance and firm performance. We find that companies with directors from academia are associated with higher performance and this relation is driven by professors without administrative jobs. We also find that academic directors play an important governance role through their advising and monitoring functions. Specifically, our results show that the presence of academic directors is associated with higher acquisition performance, higher number of patents and citations, higher stock price informativeness, lower discretionary accruals, lower CEO compensation, and higher CEO forced turnover-performance sensitivity. Overall, our results provide supportive evidence that academic directors are valuable advisors and effective monitors and that, in general, firms benefit from having academic directors.

Keywords: Academic directors; Professors; Firm performance; Advising; Monitoring

JEL Classification: G30, G34, M41

Suggested Citation

Francis, Bill and Hasan, Iftekhar and Wu, Qiang, Professors in the Boardroom and their Impact on Corporate Governance and Firm Performance (February 28, 2013). Financial Management, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2226411 or http://dx.doi.org/10.2139/ssrn.2226411

Bill Francis

Rensselaer Polytechnic Institute (RPI) - Lally School of Management & Technology ( email )

110 8th St
Troy, NY 12180
United States

Iftekhar Hasan

Fordham University - Gabelli School of Business ( email )

Rose Hill Campus Bronx
New York, NY 10458
United States

Bank of Finland ( email )

P.O. Box 160
Helsinki 00101
Finland

Qiang Wu (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Lally School of Management ( email )

110 8th St
Troy, NY 12180
United States
518-276-3338 (Phone)
518-276-8661 (Fax)

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