Board Members and Company Value
Financial Markets and Portfolio Management, Vol. 20, No. 1, pp. 33-48, 2006
Posted: 4 Apr 2006
Abstract
This essay surveys research about the value of individual members of boards of directors. When directors join or exit corporate boards, company stock prices respond, often in magnitudes of 1% of firm value or more. Related research shows that when a significant event impacts the stock price of one company, the effects are transmitted to other companies that share board members in common with the primary company. Share price reactions are sensitive to variables such as a director's occupation, independence, and professional qualifications. Together, this evidence suggests that a well-functioning market for directors might already exist, making direct regulation unnecessary and possibly counter-productive.
Keywords: Corporate governance, value of board member, stock
JEL Classification: G12, G34, G38
Suggested Citation: Suggested Citation