Do Boards Have Style? Evidence from Director Style Divergence and Board Turnover

56 Pages Posted: 5 Dec 2018 Last revised: 17 Aug 2019

See all articles by Robert C. Bird

Robert C. Bird

University of Connecticut - School of Business

Paul Borochin

University of Miami - Department of Finance

John D. Knopf

University of Connecticut - Department of Finance

Luchun Ma

University of Connecticut

Date Written: August 9, 2019

Abstract

We identify persistent director style effects on corporate policies. Director style explains a significant amount of cross-sectional variation in firm policy variables for financing, investment, operations, and corporate governance, among others. The results are significantly different from counterfactual random assignments of directors to firms, validating the director style measures. We aggregate director styles at the firm level to create a median board style. Directors styles that deviate from board style, particularly on R\&D and executive compensation policies, are significantly more likely to leave the board or leave their appointment to key board committees. Style-divergent directors across all policies are also more likely to leave the board when the firm does well, as are those with divergent CEO compensation styles when the CEO's salary is high. Board style has predictive power for future firm performance.

Keywords: Board of Directors, Corporate Governance, Board Dynamics

JEL Classification: G30, G32, G34

Suggested Citation

Bird, Robert C. and Borochin, Paul and Knopf, John D. and Ma, Luchun, Do Boards Have Style? Evidence from Director Style Divergence and Board Turnover (August 9, 2019). University of Connecticut School of Business Research Paper No. 19-01. Available at SSRN: https://ssrn.com/abstract=3292449 or http://dx.doi.org/10.2139/ssrn.3292449

Robert C. Bird

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

HOME PAGE: http://businesslaw.business.uconn.edu/robert-bird/

Paul Borochin (Contact Author)

University of Miami - Department of Finance ( email )

P.O. Box 248094
Coral Gables, FL 33124-6552
United States

John D. Knopf

University of Connecticut - Department of Finance ( email )

School of Business
2100 Hillside Road
Storrs, CT 06269
United States

Luchun Ma

University of Connecticut ( email )

Storrs, CT
United States

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