The Shareholder Wealth Effects of an Executive Joining Another Company’s Board

International Journal of Managerial Finance, Vol. 6, No. 1, 2010

17 Pages Posted: 24 Aug 2017

See all articles by John W. Byrd

John W. Byrd

University of Colorado at Denver

Ann Martin

University of Colorado at Denver

Subhrendu Rath

Curtin University - Centre for Research in Applied Economics

Date Written: July 23, 2007

Abstract

Using a sample of 104 announcements of a high-level executive (Chairman, Vice-Chairman, CEO or President) joining the board of another company from 1985 through 1997, we find a negative announcement date stock response of about one-half of one percent for the firm for which the executive works. This stock price response is larger (more negative) than that found by Rosenstein and Wyatt (1994) during an earlier sample period. Regression analysis shows that the abnormal return becomes more positive the closer the executive is to retirement and more negative as the number of other corporate boards the executive already sits on increases. These results hold for sub-samples of just CEOs and just Chairmen. Unlike Rosenstein and Wyatt (1994) we do not find that prior performance of the employing company, either market-adjusted or industry-adjusted, helps explain the cross-sectional variation in the announcement day abnormal returns.

Keywords: Boards of Directors, Board Interlocks, Corporate Governance

JEL Classification: G34

Suggested Citation

Byrd, John W. and Martin, Ann and Rath, Subhrendu, The Shareholder Wealth Effects of an Executive Joining Another Company’s Board (July 23, 2007). International Journal of Managerial Finance, Vol. 6, No. 1, 2010. Available at SSRN: https://ssrn.com/abstract=3024425

John W. Byrd (Contact Author)

University of Colorado at Denver ( email )

Department of Finance
Denver, CO
United States
970-247-9182 (Phone)

Ann Martin

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Subhrendu Rath

Curtin University - Centre for Research in Applied Economics ( email )

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