“Do Director Elections Matter?” by Kai Li
University of Illinois at Urbana-Champaign
University of British Columbia
University of Chicago
Using a hand-collected sample of more than 30,000 directors nominated for election over the period 2001–2010, we construct a novel measure of director proximity to elections—Distancefrom- election. We find that the closer a director is to her next election, the higher is CEO turnover– performance sensitivity. Each year closer to director elections is associated with a 23% increase in CEO turnover–performance sensitivity. Three tests support a causal interpretation. Cross-sectional tests further show that, when other governance mechanisms are in place, CEO turnover– performance sensitivity is less affected by Distance-from-election. We conclude that director elections have important governance implications.