Year: 2025
Type: article
Abstract: This article studies the importance of corporate boards through a learning model in which capital markets learn about incoming directors’ quality. The model’s predictions are tested across a large sample of director appointments. Estimates show that governance-related uncertainty accounts for about 10% of stock return volatility when a new director joins. The learning framework provides a theoretically grounded approach to identify when directors matter more to investors. The analysis shows that director importance varies with board composition and firm attributes: Investors perceive directors as more important on boards with greater generational diversity, in smaller firms, and firms with higher knowledge capital.
Author: Léa Stern
Institution: University of Washington
Language: English
Subfield: Accounting
Domain: Social Sciences
Open Access status: hybrid
Estimated APC paid: $3,550
OpenAlex ID: W4414988617