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Accounting for Taste: Board Member Preferences and Corporate Policy Choices

45 Pages Posted: 8 May 2003  

Scott A. Richardson

AQR Capital Management, LLC; London Business School

A. Irem Tuna

London Business School

Peter D. Wysocki

Boston University Questrom School of Business

Date Written: April 2003

Abstract

This paper explores whether firms that share common directors also pursue similar corporate policies. Using a sample of 885 U.S. firms with common directors, we find that director fixed effects strongly explain variation in firms' governance, financial, disclosure, and strategic policy choices. Moreover, the director fixed effects provide incremental explanatory power over traditional economic determinants of firms' policies. consistent with our hypotheses, the director effects are less pronounced in large firms, in firms with more outside board members, and for directors with numerous outside board appointments. Our evidence is more consistent with directors and firms "matching" their policy preferences rather than directors "imposing" their policy preferences on firms.

Keywords: Board of Directors, Corporate Governance, Corporate Policies, Disclosure

JEL Classification: D21, G34, M41, M45

Suggested Citation

Richardson, Scott A. and Tuna, A. Irem and Wysocki, Peter D., Accounting for Taste: Board Member Preferences and Corporate Policy Choices (April 2003). MIT Sloan Working Paper No. 4307-03. Available at SSRN: https://ssrn.com/abstract=405101 or http://dx.doi.org/10.2139/ssrn.405101

Scott Anthony Richardson

AQR Capital Management, LLC ( email )

Greenwich, CT
United States

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Ayse Irem Tuna

London Business School ( email )

Sussex Place
Regent's Park
London, London NW1 4SA
United Kingdom

Peter D. Wysocki (Contact Author)

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States

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