Directors’ Experience Doesn’t Always Pay Off

It may seem obvious that shareholders stand to benefit when outside directors on a company’s board have experience in the industry the company operates in.

However, that doesn’t hold true in the case of highly diversified companies, where directors tend to “play favorites” by influencing over-investment in the industries they’re most familiar with, according to a forthcoming research paper, co-authored by Jesse Ellis, associate professor of finance in the NC State Poole College of Management, along with C. Edward Fee of Tulane University, and Shawn Thomas of the University of Pittsburgh. Read the full story in this CFO post.