Appointments of academic directors |
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| Institution: | 1. Division of Economic and Risk Analysis, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549, United States;2. Department of Finance, College of Business Administration, University of Tennessee, 427 Stokely Management Center, Knoxville, TN 37996, United States;3. Department of Finance, Lerner College of Business & Economics, University of Delaware, 303 Alfred Lerner Hall, Newark, DE 19716, United States;1. Cardiff Business School, Cardiff University, UK;2. European Corporate Governance Institute (ECGI), Belgium;3. CentER, Tilburg University, The Netherlands;1. Department of Accounting, School of Management, Fudan University, China.;2. Accounting and Finance Division, Alliance Manchester Business School, University of Manchester, United Kingdom |
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| Abstract: | We examine the outside director selection process using unique data on appointments of academic directors. Overall, we find that academic directors tend to be appointed by small- and mid-cap firms expanding their boards. However, we find important differences in both the factors influencing academic appointments and the market's reaction when allowing for firm, board, and director heterogeneities. Academics in science, medicine and engineering appear to be appointed for their expertise, and the market reacts favorably. Academic administrators appear to be appointed for their networks, and the market reacts favorably when the administrator is affiliated with a business school but negatively when the administrator is not within close geographic proximity. Business professors appear to be appointed for general expertise and reputation, but we find little evidence of any significant market reaction. The results in this paper highlight the importance of recognizing heterogeneity in understanding the director selection process and the role of outside directors. |
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