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CEO Assessment and the Structure of Newly Formed Boards

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  • David J. Denis
  • Diane K. Denis
  • Mark D. Walker

Abstract

Following corporate spinoffs, unit boards are formed from scratch. We find that these "de novo" boards are smaller, more independent, include more outside directors with relevant industry expertise, and derive more industry expertise from outsiders than do industry- and size-matched peers. These differences are observed only when the unit CEO was not the CEO or a director of the pre-spinoff parent firm—that is, when there is a greater need to assess the CEO's ability and match with the firm. We conclude that the need for CEO assessment is an important element of the structure of newly formed boards.

Suggested Citation

  • David J. Denis & Diane K. Denis & Mark D. Walker, 2015. "CEO Assessment and the Structure of Newly Formed Boards," The Review of Financial Studies, Society for Financial Studies, vol. 28(12), pages 3338-3366.
    • Handle: RePEc:oup:rfinst:v:28:y:2015:i:12:p:3338-3366.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhv055
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    Citations

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    Cited by:

    1. Ferreira, Daniel & Ginglinger, Edith & Laguna, Marie-Aude & Skalli, Yasmine, 2017. "Board Quotas and Director-Firm Matching," CEPR Discussion Papers 12117, C.E.P.R. Discussion Papers.
    2. Fich, Eliezer M. & Nguyen, Tu, 2020. "The value of CEOs' supply chain experience: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 60(C).
    3. Randy Beavers & Shawn Mobbs, 2020. "Director overconfidence," Financial Management, Financial Management Association International, vol. 49(2), pages 389-422, June.
    4. Robin Chen & Chia‐Wei Huang & Chih‐Yung Lin, 2022. "Board corruption and loan contracts," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 49(9-10), pages 1929-1956, October.
    5. Nemmara K. Chidambaran & Yun Liu & Nagpurnanand Prabhala, 2022. "Director diversity and inclusion: At the table but in the game?," Financial Management, Financial Management Association International, vol. 51(1), pages 193-225, March.
    6. Ryan P. McDonough, 2023. "Corporate communication and shareholder base retention: evidence from spin-offs," Review of Quantitative Finance and Accounting, Springer, vol. 60(4), pages 1283-1327, May.
    7. Duong T. Pham, 2020. "CEO influence on the board of directors: Evidence from corporate spinoffs," European Financial Management, European Financial Management Association, vol. 26(5), pages 1324-1349, November.
    8. Ting-Kai Chou & Hsuan-Ling Feng, 2019. "Multiple directorships and the value of cash holdings," Review of Quantitative Finance and Accounting, Springer, vol. 53(3), pages 663-699, October.

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