Directors’ Career Concerns: Evidence from Proxy Contests and Board Interlocks

52 Pages Posted: 18 Aug 2016 Last revised: 12 Mar 2021

See all articles by Shuran Zhang

Shuran Zhang

Hong Kong Polytechnic University

Date Written: January 28, 2021

Abstract

This paper studies the disciplinary spillover effects of proxy contests on companies that share directors with target firms, that is, interlocked firms. In difference-in-differences tests, I find that interlocked firms reduce excess cash holdings, increase shareholder payouts, cut CEO compensation, and engage in less earnings management in the year after proxy contests. The effects are more pronounced when both the interlocked and target firms have a unitary board and when the interlocking director is up for election, is younger, or has shorter tenure. Overall, the evidence highlights the importance of directors’ career concerns in policy spillovers across firms with board interlocks.

Suggested Citation

Zhang, Shuran, Directors’ Career Concerns: Evidence from Proxy Contests and Board Interlocks (January 28, 2021). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2825786 or http://dx.doi.org/10.2139/ssrn.2825786

Shuran Zhang (Contact Author)

Hong Kong Polytechnic University ( email )

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