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School of Business | Department of Finance | Finance | 2014
Thesis number: 13679
What determines post-CEO board memberships - Evidence from Finland
Author: Prajogo, Natan
Title: What determines post-CEO board memberships - Evidence from Finland
Year: 2014  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; johtaminen; management; johtajat; managers; urakehitys; career development; pörssiyhtiöt; exchange-listed companies; corporate governance; corporate governance; Suomi; Finland
Pages: 64
Key terms: CEO; board service; board membership; directorship; performance; Finnish; post-CEO; relationship; corporate governance; horizon problems; incentives; career concerns; retirement

The aim of this study is to find out how often do the Finnish CEOs join their own and outside boards and how their CEO performances and other factors contribute to that. Most emphasis will be given to analyze the probability effects of accounting and stock return performances during CEO tenure to joining boards after finishing duties as CEO. Other variables that will be taken into account are, for example, CEO age, tenure of last CEO position, company size, and whether the CEO was hired from within the company.


I collect data on former Finnish CEOs of publicly listed Finnish companies who depart from the CEO position between January 2000 and February 2014. All CEO-related data is hand-collected from public sources and in total my data consists of 222 CEOs from 103 companies. Accounting and stock return data is collected using Thomson One Banker. I use logit regression models to analyze the effects of performance and other variables to CEO receiving directorships in both own and outside companies' boards. I will mostly report my findings based on what directorship positions the CEOs held two years after departing from CEO position. Accounting and stock return performances are evaluated from the last four years of CEO tenure or whole CEO tenure, whichever is shorter.


I find strong evidence that the CEOs who are chosen to both their own boards and outside boards perform significantly better during their CEO tenure compared to those CEOs who received no directorships. My findings suggest that boards are able to identify strong performers and emphasize objective results when choosing additional members. Moreover, being hired from within the company has a positive and significant effect on continuing in own board. CEOs from larger companies are more likely to receive board directorships in outside boards. Increase in CEO tenure increases the likelihood of joining both own and outside boards.
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