I analyze 1,493 first-time director appointments to the boards of Fortune 1000 firms during 1997-1999, to investigate whether certain outside directors are better than others. I find that investor reactions to director appointments are significantly higher when appointees are CEOs of other firms than when they are not. I also find that CEOs of other companies are more likely to become outside directors in organizations with considerable growth opportunities. Because for these firms a large portion of their value hinges upon realizing their growth potential, I conclude that CEOs of other firms are sought in order to enhance firm value.
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Eliezer M. Fich (2005) studied this question.
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