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The Review of Corporate Finance Studies Vol. 11 No. 2 2022

Are Directors Rewarded for Excellence? Evidence from Reputation Shocks and Career Outcomes

Mark A. Chen1; Hai Tran2; Qinxi Wu3; Evgenia Zhivotova4

1 J. Mack Robinson College of Business, Georgia State University · 2 College of Business Administration, Loyola Marymount University · 3 Hankamer School of Business, Baylor University · 4 University of Amsterdam

Abstract

This study examines whether the labor market rewards directors for individual excellence. We use national director awards to capture large, positive shocks to individual reputation. We find strong evidence that the labor market recognizes and rewards “superstar” directors. Award events lead to positive announcement returns and increase awardees’ chances of gaining new board seats at prestigious firms. Consistent with theories of career concerns and labor market signaling, the reputational effects are greater for younger directors and for nonoverboarded directors. Overall, our findings offer new insights into the nature of reputation and rewards in the upper echelon of the director labor market. (JEL G30, G34, G39) Received August 15, 2020; editorial decision May 11, 2021 by Editor Andrew Ellul.

DOI
10.1093/rcfs/cfab017
Volume
11
Issue
2
Pages
263-313
Language
en
Sources
bibtex:phds-export.bib crossref openalex

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