Does Independent Directors’ CEO Experience Matter?*

Kang, Shinwoo; Kim, E Han; Lu, Yao

doi:10.1093/rof/rfx023

Cited by 68 publications

(29 citation statements)

References 42 publications

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“…The magnitude of the CEO board industry experience coefficient is higher compared to the other board industry experience variables used in the regression models shown in the previous columns; thus, it seems that the results of the model in Column 3 are largely driven by CEO board industry experience of the outside directors. This finding is in line with Kang et al (2017), who argue that industry experience gained while working as a CEO improves firm-value.…”

Section: Multivariate Analysissupporting

confidence: 91%

“…find that firms with a higher fraction of directors from related industries on the board benefit from lower accounts receivable, lower inventories, shorter cash conversion cycles, and higher accounts payable. In another related study, Kang et al (2017) analyze the relevance of directors' experience as a CEO in the same industry and find it to be positively related to firm value. They also show that directors with CEO industry experience particularly enhance value if they are current CEOs and if they are (or were) more successful CEOs.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Our paper is closely related to the nascent literature on industry experience of corporate executives Huang, 2014) and directors (Masulis et al, 2012b;Cohen et al 2014;Faleye et al, 2014;Denis et al, 2015;Wang et al, 2015;von Meyerinck et al, 2016;Kang et al, 2017). A more thorough review of this literature is provided in Section 2.…”

Section: Introductionmentioning

confidence: 99%

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Industry expert directors

Drobetz

Meyerinck

Oesch

et al. 2018

Journal of Banking & Finance

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We analyze the valuation effect of board industry experience and channels through which industry experience of outside directors affects firm value. Our analysis shows that firms with more experienced outside directors are valued at a premium compared to firms with less experienced outside directors. Additional analyses, including a quasi-experimental setting based on director deaths, mitigate endogeneity concerns. Further tests show that the board industry experience-firm value relation is more pronounced for firms with larger investment programs, larger cash reserves, and during crises. In contrast, it is weaker in more dynamic industries where the value of previously acquired experience is likely to be diminished. We also provide some evidence that corporate governance problems in firms, in particular entrenched CEOs, and a limited supply of industry experts prevent firms from appointing more industry experts to their boards, even though this would be value-increasing. Overall, our findings are consistent with board industry experience being a valuable corporate governance mechanism.

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Section: Multivariate Analysissupporting

confidence: 91%

Section: Literature Reviewmentioning

confidence: 99%

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Industry expert directors

Drobetz

Meyerinck

Oesch

et al. 2018

Journal of Banking & Finance

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“…Existing studies have also shown the importance of independent directors' industry-specific expertise to firm performance, strategies, and value (e.g., Anderson and Reeb 2004;Kor and Misangyi 2008;Faleye et al 2013;Dass et al 2014;Kang et al 2017). In line with these findings, Drobetz et al (2018) find such expertise increases firm value.…”

Section: Literature Reviewmentioning

confidence: 62%

Does Independent Industry Expertise Improve Board Effectiveness? Evidence From Bank CEO Turnovers

Chen

2018

Int Rev Finance

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This study explores the impact of independent bank directors’ financial industry expertise on board effectiveness by investigating bank CEO turnovers and post‐turnover bank performance. Empirical results find such expertise increases the probability of forced CEO turnover and the probability of outsider succession. It improves bank performance and reduces bank risk‐taking following a forced CEO turnover. This is likely because industry‐specific expertise enhances boards’ ability to locate a superior successor CEO and to monitor and advise the new management. Market reaction to bank CEO turnover announcements tends to agree with this view.

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“…The patent data is drawn from Kogan et al (2017). As in Kang et al (2018), we use the natural log of one plus Scaled_Citation in year t + 3 as the dependent variable. 18 Table 3 reports the estimation results.…”

Section: Empirical Examinationmentioning

confidence: 99%

Impact of Classified Board on M&A Target Shareholder Value: Nurturing Innovation through Entrenchment

2018

Self Cite

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We find that classified board in the M&A target firm is positively related to the target shareholder value, but only for firms with both intensive R&D investment and strong external governance. We also find that firms with classified board exhibit superior quality innovation when they have both intensive R&D investment and strong external governance. These findings are consistent with the view that classified board provides long‐term perspectives that promote productive but risky R&D investment, which is highly valued in M&A. Our findings are distinct from the view expressed in extant literature that classified board enhances target shareholder value because of stronger bargaining power.

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Does Independent Directors’ CEO Experience Matter?*

Cited by 68 publications

References 42 publications

Industry expert directors

Industry expert directors

Does Independent Industry Expertise Improve Board Effectiveness? Evidence From Bank CEO Turnovers

Impact of Classified Board on M&A Target Shareholder Value: Nurturing Innovation through Entrenchment

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