Does the location of directors' additional positions matter? A new dimension of board structure

Abstract

This paper analyzes the impact on firm value of directors with outside directorships and/or executive positions in the same geographic area (DSAs). The findings show that DSAs are associated with higher firm value because they better understand the local business environment and have better local connections. This value impact is more prominent for rural firms, innovative firms, and firms with high growth rates, indicating that DSAs' local information advantage is more important for firms in areas with less effective information transmission, firms with high R&D expenses, and firms facing high uncertainty. Also, DSAs help corporations better manage local economic shocks, improve financial reporting quality, and increase CEO incentive pay.