Investor Perceptions of Board Performance: Evidence from Uncontested Director Elections

42 Pages Posted: 2 Mar 2008 Last revised: 13 May 2014

See all articles by Paul E. Fischer

Paul E. Fischer

University of Pennsylvania - Accounting Department

Jeffrey Gramlich

Carson College of Business

Brian P. Miller

Indiana University - Kelley School of Business - Department of Accounting

Hal D. White

Penn State University

Multiple version iconThere are 2 versions of this paper

Date Written: May 12, 2009

Abstract

Many argue that uncontested director elections are meaningless because director nominees are almost surely elected. We assess whether the outcomes of uncontested director elections still serve as an informative poll of investor perceptions regarding board performance. We find that higher (lower) vote approval is associated with lower (higher) stock price reactions to subsequent announcements of management turnovers, even after controlling for other performance metrics. We also provide evidence that vote outcomes are associated with future actions in a manner consistent with lower vote approval reflecting poorly performing boards. Specifically, we find that firms with poorly perceived boards are more likely to experience forced CEO turnovers, greater board member turnover, and lower CEO compensation in subsequent years. In addition, lower approval is associated with both a decrease in the number of acquisitions and an increase in the number of divestitures in the following year, and better-received acquisitions and divestitures.

Keywords: performance measurement, corporate governance, corporate democracy, director elections, voting

JEL Classification: G34, M40

Suggested Citation

Fischer, Paul E. and Gramlich, Jeffrey and Miller, Brian P. and White, Hal D., Investor Perceptions of Board Performance: Evidence from Uncontested Director Elections (May 12, 2009). Available at SSRN: https://ssrn.com/abstract=928843 or http://dx.doi.org/10.2139/ssrn.928843

Paul E. Fischer

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

Jeffrey Gramlich

Carson College of Business ( email )

Wilson Rd.
College of Business
Pullman, WA 99164
United States

HOME PAGE: http://https://business.wsu.edu/research-faculty/institutes/hoops-institute/

Brian P. Miller (Contact Author)

Indiana University - Kelley School of Business - Department of Accounting ( email )

1309 E. 10th Street
Bloomington, IN 47405
United States
812-855-2606 (Phone)

Hal D. White

Penn State University ( email )

210 Business Building
Smeal College of Business
University Park, PA 16802-3306
United States
814-863-7055 (Phone)

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