On the determinants of director additions and removals

Abstract

This article studies director additions and removals for S&P 500 firms during the period 2000 to 2003. It finds that firms with smaller board size than estimated efficient levels add more and remove fewer directors than firms with larger board size. It also finds that firms with lower board independence than estimated efficient levels add more and remove fewer independent directors, and add fewer and remove more nonindependent directors than firms with higher board independence. These findings suggest that firms add and remove directors to adjust board structure in a manner consistent with economic efficiency.