Article
CEO Outside Directorships and Managerial Efficiency: The Role of Host Board Capital
Corporate Governance: An International Review
(2021)
Abstract
Research Question/Issue: Do CEO outside board directorships improve or reduce
CEO managerial efficiency? What is the role of host board capital in this relationship?
Research Findings/Insights: We explore the value of CEO outside directorships on
managerial efficiency by identifying a unique empirical setting where a CEO's number
of outside board seats is exogenously decreased by a merger that eliminates the
board of a host firm the CEO is serving on. Using this event as our empirical instrument,
we find that outside directorships decrease a CEO's managerial efficiency
while host board capital reduces this effect.
Theoretical/Academic Implications: Proponents view outside board service as a
valuable leadership development tool to mentor the CEO while others promulgating
an agency view argue that outside board service detracts from the CEO's ability to
improve the efficiency of the home firm as it leads to busyness of the CEO. We shed
light on this debate by arguing that CEO outside directorships might reduce CEO's
managerial efficiency; however, this effect might be contingent on the characteristics
of the host board.
Practitioner/Policy Implications: Our findings offer insights to practitioners about
the value of multiple directorships and the importance of the host board capital while
informing policy makers about the potential restrictions on outside board
assignments.
Keywords
- corporate governance,
- board capital theory,
- board of directors,
- CEO managerial efficiency,
- CEO outside directorships
Publication Date
2021
DOI
10.1111/corg.12337
Citation Information
Canan C. Mutlu, Sunay Mutlu and Steve Sauerwald. "CEO Outside Directorships and Managerial Efficiency: The Role of Host Board Capital" Corporate Governance: An International Review (2021) Available at: http://works.bepress.com/sunay-mutlu/7/