Outside board memberships of CEOs: Expertise or entrenchment?

Benjamin Balsmeier, Achim Buchwald and Heiko Peters

No 26, DICE Discussion Papers from Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE)

Abstract: We investigate whether outside board memberships of CEOs signal expertise or entrenchment. The analysis is based on panel data of the largest German companies covering the period from 1996 to 2008. Supporting the entrenchment hypothesis, our analysis reveals that firms having a CEO with one or more outside mandates suffer from significantly weaker firm performance compared with firms having a CEO without any outside board mandates. Moreover, disciplinary CEO turnovers become less likely and turnover-performance sensitivity declines with rising board memberships of the top manager. We conclude that outside mandates enhance managerial power at the expense of the home firm's shareholders.

Keywords: Corporate Governance; Entrenchment; Outside Board Memberships; CEO turnover (search for similar items in EconPapers)
JEL-codes: J24 J63 L25 M50 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-bec
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:zbw:dicedp:26

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