Stock Market Reactions to Board Appointments

Abstract

This study examines the reaction of the stock market to the appointment of directors, and whether this is conditional on directorial characteristics such as appointment type, number of directorships held, boardroom experience, and the existence of any family relationship. We find that the stock price effect of the appointment of busy directors is significantly negative with similar results obtained for family-related directors' appointments. The market reaction to appointment of directors with prior boardroom experience is found to be significantly positive. We also find evidence that the appointment of non-executive directors is valued more highly by the stock market.

Keywords: Corporate Governance, Board of Directors

JEL Classification: G32, G34, L22