Performance Effects of Appointing Other Firms’ Executive Directors to Corporate Boards: An Analysis of UK Firms
This paper studies the effect on company performance of appointing non-executive directors that are also executive directors in other firms. The analysis is based on a new panel dataset of UK companies over 2002–2008. Our findings suggest a positive relation between the presence of these non-executive directors and the accounting performance of the appointing companies. The effect is stronger if these directors are executive directors in firms that are performing well. We also find a positive effect when these non-executive directors are members of the audit committee. Overall, our results are broadly consistent with the view that non-executive directors that are executives in other firms contribute to both the monitoring and advisory functions of corporate boards.