Professional Directors and Governance Quality

56 Pages Posted: 11 Mar 2017 Last revised: 8 Nov 2018

See all articles by Aida Sijamic Wahid

Aida Sijamic Wahid

University of Toronto - Accounting; University of Toronto - Rotman School of Management

Kyle T. Welch

George Washington University - School of Business

Date Written: August 23, 2018


We examine professional directors—board members with no employment outside of serving as independent directors. We find that boards with a higher percentage of professional directors engage in more acquisitions, experience lower acquisition-announcement returns, and exhibit lower performance-turnover sensitivity and lower financial performance. We also examine the returns surrounding the appointment-announcement dates of professional directors and find that firms experience significantly lower cumulative abnormal returns upon the appointment announcement of professional directors as compared to non-professional directors. The negative returns are primarily experienced by firms that face greater agency issues, suggesting that the market does not value professional directors for stricter monitoring. Overall, our findings do not lend support for calls to professionalize corporate boards.

Keywords: Corporate governance, board of directors, professional director, board composition, board monitoring, director appointment, independent director

JEL Classification: G30, G38, J10, G3, M10

Suggested Citation

Wahid, Aida Sijamic and Welch, Kyle T., Professional Directors and Governance Quality (August 23, 2018). Contemporary Accounting Research, Forthcoming; Rotman School of Management Working Paper No. 2930117. Available at SSRN: or

Aida Sijamic Wahid (Contact Author)

University of Toronto - Accounting ( email )

105 St George St
Toronto, ON M5S 3E6

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4

Kyle T. Welch

George Washington University - School of Business ( email )

Washington, DC 20052
United States

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