Military experience and subsequent effectiveness as a director

Abstract

Wars inevitably result in an increase in the workforce of those with military experience. The military training associated with such experience promotes leadership skills and emphasizes a unique value system encompassing integrity, duty, selflessness and self-discipline. We hypothesize that directors with military experience encourage timely disclosure of firm-specific information, which leads to higher stock price informativeness. Based on a sample of listed firms in 46 countries over the period 1999–2016, we document that having a military director on board is positively related to stock price non-synchronicity, informed trading and shorter price response delay. Exploiting exogenous variations in the likelihood of having military directors that arise as a result of variations in the military talent pool, we confirm the causal inference of these results. Our findings suggest that military directors reduce corporate misconduct and improve the timely disclosure of information.