Activist Rookie Directors
57 Pages Posted: 2 May 2019
Date Written: May 1, 2019
We examine the value-enhancing role of unseasoned independent directors nominated through shareholder activism events (Activist UIDs). Firms appointing Activist UIDs experience a larger value increase than those appointing Nonactivist UIDs, particularly when Activist UIDs have relevant experience, when they sit on the monitoring committees, and when their sponsors hold large target ownership. These firms also experience a decrease (increase) in investment (CEO compensation delta and dividends) post-appointment. Supporting the view that Activist UIDs add value to firms, the appointments of Activist UIDs are greeted more positively by the market, and they receive more favorable votes and obtain more additional directorships.
Keywords: Activist unseasoned independent directors, Activist shareholder, Monitoring, Firm value, Announcement return, Director voting, Directorial labor market
JEL Classification: G14, G30, G32, G34
Suggested Citation: Suggested Citation