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

Financial Management, Volume 44, Issue 3, 1 September 2015, Pages 547-581

Bank of Finland Research Discussion Paper No. 15/2014

59 Pages Posted: 1 Aug 2014 Last revised: 29 Sep 2015

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: July 9, 2014

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 (July 9, 2014). Financial Management, Volume 44, Issue 3, 1 September 2015, Pages 547-581 ; Bank of Finland Research Discussion Paper No. 15/2014. Available at SSRN: https://ssrn.com/abstract=2474522 or http://dx.doi.org/10.2139/ssrn.2474522

Bill Francis

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

110 8th St
Troy, NY 12180
United States

Iftekhar Hasan (Contact Author)

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

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)

Register to save articles to
your library

Register

Paper statistics

Downloads
324
rank
13,012
Abstract Views
2,627
PlumX Metrics