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Cambridge Endowment for Research in Finance (CERF)


This project investigates the impact of director reputational incentives in the labour market on director monitoring, corporate governance, and firm performance.

Handcollecting a sample of retired CEO directors, we study the impact of their CEO retirement announcements on the value of the firms in which they continue to hold out-side directorships, and whether post-retirement diminishing incentives in the director labour market wield real impact on the quality and intensity of retired CEO director monitoring and on governance. We aim at providing direct and empirical evidence of the incentives of independent directors on firm governance and performance.

Activities and Achievement:

We build our sample of retired CEO directors with outside directorships in the U.S.

since 1992 from many data sources such as Execucomp, RiskMetrics, and SEC filing (Form 8-K). We then check the details of each case of retirements on Factiva to ensure that we obtain the exact chronology of the event. We obtain personal details of direc-tors of public firms in the U.S. from BoardEx of Management Diagnostics Limited. Data on firm accounting and stock prices and governance metrics are obtained from CRSP and RiskMetriks, respectively.

We have conducted an event study on a pilot sample of CEO director retirement.

The random sample includes 327 outside directorships hold by 495 CEOs who retired from their CEO position. In different event windows (-1,+1; 0,+1) following the an-nouncement of the CEO retirement from their CEO position, the stock prices of firms in which retiring CEOs are still holding outside directorships react negatively and sig-nificantly. In the window (-1,+1), the average cumulative abnormal return is -2.4%, significant at the 1% level.

Project Title: Director Incentives in the Labour Market, Corporate Governance, and Firm Performance

PI: Bang Dang Nguyen

Project Update - August 2021

Project Update - August 2020

Project Update - April 2020

Project Update - August 2019

Project Update - April 2019

Project Update - August 2018