The Market for Non-Executive Directors: Does Acquisition Performance Influence Future Board Seats?

The Market for Non-Executive Directors: Does Acquisition Performance Influence Future Board Seats?

Marc Goergen, Svetlana Mira, Noel O'Sullivan

Series number :

Serial Number: 
551/2018

Date posted :

February 13 2018

Last revised :

February 12 2018
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Keywords

  • non-executive directors • 
  • market for directors • 
  • Corporate governance • 
  • mergers and acquisitions • 
  • dividends

This paper investigates whether non-executive directors associated with good (bad) board decisions are subsequently rewarded (penalized) in the market for directors.

This question is addressed by assessing whether the post-acquisition performance of acquiring companies influences the number of non-executive directorships that non-executives involved in these acquisitions hold subsequent to the acquisition. We find that non-executives on the boards of acquirers that increase (omit or cut) their dividend subsequently hold more (fewer) non-executive directorships in listed companies. Our findings suggest that the non-executive labor market is efficient and rewards (penalizes) non-executives for good (bad) acquisitions.

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Authors

Real name: 
Svetlana Mira
Professor
Real name: 
Noel O'Sullivan
School of Business and Economics, Loughborough University