How Much Do Directors Influence Firm Value?

Aaron Burt, Christopher Hrdlicka and Jarrad Harford ()

The Review of Financial Studies, 2020, vol. 33, issue 4, 1818-1847

Abstract: The value a director provides to a firm is empirically difficult to establish. We estimate that value by exploiting the commonality in idiosyncratic returns of firms linked by a director and show that, on average, a director’s influence causes variation in firm value of almost 1% per year. The return commonality is not due to industry or other observable economic links. Variation in the availability of information on shared directors and a placebo test exploiting the timing of shared directors provide further identification. The results also imply that the directorial labor market does not fully assess directors in real time.Received January 19, 2018; editorial decision December 20, 2018 by Editor David Denis.

Date: 2020
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