CEO Assessment and the Structure of Newly Formed Boards

Review of Financial Studies, Forthcoming

47 Pages Posted: 8 Jun 2014 Last revised: 4 Sep 2015

See all articles by David J. Denis

David J. Denis

University of Pittsburgh

Diane K. Denis

University of Pittsburgh - Katz School of Business

Mark D. Walker

North Carolina State University

Date Written: September 2015

Abstract

Following corporate spinoffs, unit boards are formed from scratch. We find that these ‘de novo’ boards are smaller, more independent, include more outside directors with relevant industry expertise, and derive more industry expertise from outsiders than do industry and size-matched peers. These differences are observed only when the unit CEO was not the CEO or a director of the pre-spinoff parent firm – i.e., when there is a greater need to assess the CEO’s ability and match with the firm. We conclude that the need for CEO assessment is an important element of the structure of newly formed boards.

Keywords: Board of directors, Spinoffs, Governance

JEL Classification: G34

Suggested Citation

Denis, David J. and Denis, Diane K. and Walker, Mark D., CEO Assessment and the Structure of Newly Formed Boards (September 2015). Review of Financial Studies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2447060 or http://dx.doi.org/10.2139/ssrn.2447060

David J. Denis (Contact Author)

University of Pittsburgh ( email )

Katz Graduate School of Business
Pittsburgh, PA 15260
United States
412-648-1708 (Phone)

Diane K. Denis

University of Pittsburgh - Katz School of Business ( email )

368B Mervis Hall
Pittsburgh, PA 15260
United States
412-624-0296 (Phone)

Mark D. Walker

North Carolina State University ( email )

Raleigh, NC 27695
United States

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