The Market for Non-Executive Directors: Does Acquisition Performance Influence Future Board Seats?
46 Pages Posted: 2 Feb 2018
Date Written: January 2018
This paper investigates whether non-executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors. This question is addressed by assessing whether the post-acquisition performance of acquiring companies influences the number of non-executive directorships that non-executives involved in these acquisitions hold subsequent to the acquisition. We find that non-executives on the boards of acquirers that increase (omit or cut) their dividend subsequently hold more (fewer) non-executive directorships in listed companies. Our findings suggest that the non-executive labor market is efficient and rewards (penalizes) non-executives for good (bad) acquisitions.
Keywords: Non-executive directors, market for directors, corporate governance, mergers and acquisitions, dividends
JEL Classification: G34, G35
Suggested Citation: Suggested Citation