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

70 Pages Posted: 25 Nov 2019 Last revised: 17 Aug 2020

See all articles by Mark A. Chen

Mark A. Chen

Georgia State University - Robinson College of Business

Hai Tran

Loyola Marymount University - Department of Finance and Computer Information Systems

Qinxi Wu

Baylor University - Hankamer School of Business

Evgenia Zhivotova

University of Amsterdam Business School

Date Written: August 2020

Abstract

We examine how developing an individual reputation for excellence affects a director’s career outcomes in the labor market for boardroom talent. Using unique data on prestigious director awards, we find that individuals who experience very positive reputational shocks are typically rewarded with new board seats at firms that rank high in terms of size or public prestige. In addition, consistent with theories of career concerns and labor-market signaling, we find that these reputational effects are greater for younger directors and for non-overboarded directors. Estimation via instrumental variables supports a causal interpretation of the findings. Overall, our results provide new, clear-cut evidence of reputational rewards in the market for boardroom talent.

Keywords: Boards, directors, reputation, director awards, settling-up, career concerns, labor markets, boardroom talent

JEL Classification: G30, G31, G34

Suggested Citation

Chen, Mark A. and Tran, Hai and Wu, Qinxi and Zhivotova, Evgenia, Are Directors Rewarded for Excellence? Evidence from Reputation Shocks and Career Outcomes (August 2020). Available at SSRN: https://ssrn.com/abstract=3481519 or http://dx.doi.org/10.2139/ssrn.3481519

Mark A. Chen

Georgia State University - Robinson College of Business ( email )

35 Broad Street
Suite 1230
Atlanta, GA 30303-3083
United States

Hai Tran (Contact Author)

Loyola Marymount University - Department of Finance and Computer Information Systems ( email )

Los Angeles, CA 90045
United States
3103387409 (Phone)

HOME PAGE: http://www.haitranv.com

Qinxi Wu

Baylor University - Hankamer School of Business ( email )

Waco, TX 76798
United States

Evgenia Zhivotova

University of Amsterdam Business School ( email )

Roetersstraat 18
Amsterdam, 1018WB
Netherlands

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