Three essays on boards of directors

In the first essay, I analyze directorships held by CEOs who retired during 1989-1993 and during 1998-2002. My results suggest that retired CEOs became more popular on boards. Also, although pre-retirement accounting performance helps explain the number of outside directorships a retired CEO held in the 1989-1993 sample as Brickley, Linck and Coles (1999) found, it does not in the 1998-2002 sample. Third, a company's stock performance during a CEO's tenure affects whether he became an inside director of that company after retirement. A 25% change in stock price performance increased the probability by 11% in the 1989-1993 sample, and 51% in the 1998-2002 sample. Finally, if a retired CEO worked in a regulated industry, his probability of serving at least one outside directorship fell by 34% in the 1989-1993 sample, and 24% in the 1998-2002 sample. In the second essay, I develop a matching model in the market for directors to explain equilibrium board quality. In my model, (1) the boards of directors have the role of monitoring and advising, (2) the impact of a CEO's quality increases with the size of a firm under his control, (3) the CEO and the boards would be either complements or substitutes, in the production function, and (4) the boards enjoy money value and reputation value. When the reputation depends on market value of firms, potential directors like to work at firms with talented CEOs if they can enjoy enough reputational gain on boards owing to talented CEOs. In contrast, when potential directors want value-added for reputation, they would be at firms with low-ability CEOs if the CEO and the boards are substitute. My empirical estimates suggest that talented ongoing CEOs and former CEOs work as outside directors of firms with high market capitalization, though neither with high assets nor sales. The quality of boards is higher where CEO pay is higher. Finally, board pay is 0.13% higher where CEO pay is 1% higher. We can infer that the CEO and the boards are complements in the production function. In the third essay, I explore the matching pattern in the market for corporate directors. The CEO's of relatively big firms in U.S. tend to serve as outside directors on firms smaller than their own. Also, the best director on boards of American large firms is the CEO's of bigger firm. To explain these, I construct an intertemporal searching model with heterogeneous directors and firms in a director market. Both sides only care about quality, not price. My calibration shows that the best candidate for outside directors would be willing to accept an offer from the lower 40% firm (e.g., 300th best of 500 firms) under the uniform distribution of a firm, and from the lower 46% (e.g., 280th best of 500 firms) under the extreme value distribution