Director Skill Networks

This study investigates how firms select directors from other company boards. The resource acquisition theory states that firms select directors to gain specific skills and expertise which is missing on a board. In contrast, homophily theory states that firms select directors that fit into the current pool of directors. Our results lend strong support for the latter and show that firms acquire skills that are neither common nor rare, thus lending additional support for board fit. Our findings highlight why many firms have such difficulties in accessing rare director skills. This might have negative implications on how well boards can fulfill their monitoring role within the principal-agent framework of corporate governance.

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