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Cai, J., Nguyen, T., & Walkling, R. A. (2021). Director Appointments: It Is Who You Know. The Review of Financial Studies, hhab064.


Using 9,801 director appointments during 2003–2014, we document the dramatic impact of connections. Sixty-nine percent of new directors have professional ties to incumbent boards, a group representing 13%% of all potential candidates. Consistent with facilitating coordination and reducing search costs, connections help boards bring in gender diversity, new skills, and new industry background. More complex firms and firms in more competitive environments tend to appoint connected directors and experience better market reactions and higher shareholder votes. Connections to incumbent CEOs, however, result in lower announcement returns and shareholder votes. We use death (merger)-induced network loss (gain) as instruments.

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