Shoot for the stars? Predicting the recruitment of prestigious directors at newly public firms

• Main Authors: ACHARYA, Abhijith G., POLLOCK, Timothy G.
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2013
• Subjects: board of directors; homophily; IPO; power; signaling; status; Business; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/lkcsb_research/3542; https://ink.library.smu.edu.sg/context/lkcsb_research/article/4541/viewcontent/shootfor.pdf
• Institution: Singapore Management University

This study explores how CEOs' and outside directors' desires for the benefits of signaling and homophily intertwine with their concerns over maintaining power and preserving local status hierarchies to affect the likelihood a firm recruits prestigious outside directors to its board. Using pooled cross-sectional data on the five years following the IPOs of 210 firms that went public between 2001 and 2004, we found that prestigious CEOs and directors viewed the recruitment of prestigious new directors differently, and that these perceptions were moderated by factors that increase the salience of risk of the potential losses to the CEO and existing board members.