Do Director Elections Matter?
67 Pages Posted: 24 May 2015 Last revised: 6 Jul 2017
Date Written: July 5, 2017
Using a hand-collected sample of election nominations for more than 30,000 directors over the period 2001–2010, we construct a novel measure of director proximity to elections called Years-to-election. We find that the closer directors of a board are to their next elections, the higher CEO turnover-performance sensitivity is. A series of tests, including one that exploits variation in Years-to-election that comes from other boards, supports a causal interpretation. Further analyses show that other governance mechanisms do not drive the relation between board Years-to-election and CEO turnover-performance sensitivity. We conclude that director elections have important implications for corporate governance.
Keywords: director elections; director nominations; staggered boards; CEO turnover–performance sensitivity; agency problems; corporate governance
JEL Classification: G34, G38
Suggested Citation: Suggested Citation