Download This PaperCEO Assessment and the Structure of Newly Formed Boards
Review of Financial Studies, Forthcoming
47 Pages Posted: 8 Jun 2014 Last revised: 4 Sep 2015
Date Written: September 2015
Abstract
Following corporate spinoffs, unit boards are formed from scratch. We find that these ‘de novo’ boards are smaller, more independent, include more outside directors with relevant industry expertise, and derive more industry expertise from outsiders than do industry and size-matched peers. These differences are observed only when the unit CEO was not the CEO or a director of the pre-spinoff parent firm – i.e., when there is a greater need to assess the CEO’s ability and match with the firm. We conclude that the need for CEO assessment is an important element of the structure of newly formed boards.
Keywords: Board of directors, Spinoffs, Governance
JEL Classification: G34
Suggested Citation: Suggested Citation