The Market for Non-Executive Directors: Does Acquisition Performance Influence Future Board Seats?
Series number :
- non-executive directors •
- market for directors •
- Corporate governance •
- mergers and acquisitions •
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.