Job networks and board appointments

Abstract

Using data on US publicly quoted companies from 2003 to 2012, we investigate whether knowing at least one of the sitting board members increases the probability of being hired by this board as an outside director. We use data on the past employment history of candidates to discover whether or not they have previously worked with the directors sitting on the board. We also recover the links of candidates with the CEO of the board and the members of the nomination committee. Because such job networks might be endogenous, we instrument them using university networks. Finally, we use a technique developed by Kramarz and Skans (2010) to make estimation feasible. Ultimately, we want to understand whether such job networks are beneficial (in the sense that they allow for the screening of good candidates) or detrimental (in the sense that they favor friends over other candidates) to firm performance.