Too Many Peas in a Pod? How Overlaps in Directors’ Local and Global Status Characteristics Influence Board Turnover in Newly Public Firms

Abstract

Drawing on status characteristics theory, we explore how boards’ social structures influence board turnover. We theorize that (1) understanding directors’ relative standing and spheres of influence in the local status hierarchy creates deference structures that reduce conflict and enhance stability, thereby reducing board turnover; and (2) shared performance expectations and attraction based on homophily in the global status hierarchy can also reduce conflict and enhance stability, and thus serve as another means of reducing board turnover. Using data on the five years following the initial public offerings (IPOs) of 218 firms that went public between 2001 and 2005, we find that overlaps in directors’ local status characteristics captured by their tenure and expertise and directors’ global status homogeneity increase the likelihood of director exit. However, the combinations of directors’ local and global shared specific status characteristics shape the relative salience of the positive or negative effects of board’s local status characteristics, leading to different effects on board turnover.