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- Title
Takeover Immunity, Takeovers, and the Market for Nonexecutive Directors.
- Authors
Ashraf, Rasha; Chakrabarti, Rajesh; Fu, Richard; Jayaraman, Narayanan
- Abstract
We develop and test two competing hypotheses that relate the market for nonexecutive directors to the level of external monitoring mechanism of the firms they serve. The Reward for Discretion Hypothesis posits that directors are valued more when they display discretion concerning their choice of antitakeover provision (ATP) levels rather than follow a rule. Alternatively, the CEO Risk Aversion Hypothesis implies that CEOs seek directors with inclination for uniform and high ATP levels. We examine how changes in ATP levels and approval of value creating/destroying acquisitions affect the careers of nonexecutive directors. Our results, based on data from about 3,000 listed US companies during 1994-2003, support the Reward for Discretion Hypothesis.
- Subjects
UNITED States; HYPOTHESIS; MERGERS &; acquisitions; CHIEF executive officers; RISK aversion; CORPORATE directors; DISCRETION; OCCUPATIONS; AMERICAN business enterprises
- Publication
Financial Management (Wiley-Blackwell), 2010, Vol 39, Issue 1, p83
- ISSN
0046-3892
- Publication type
Article
- DOI
10.1111/j.1755-053X.2010.01067.x