Who will board a sinking ship? A firm-director interdependence perspective of mutual selection between declining firms and director candidates

Han Jiang, Jun Xia, Cynthia E. Devers, Wei Shen

Research output: Contribution to journalReview articlepeer-review

4 Scopus citations

Abstract

We develop a firm-director interdependence perspective to theorize director appointments as the outcome of a mutual selection process in which firms and director candidates select each other based on their organizational and personal dependencies. We apply this perspective to address a puzzle regarding director appointment in declining firms: Declining firms are often motivated to bring in director candidates with high resource endowments to help enact turnarounds, but these candidates may not join a declining firm's board due to the potential uncertainties and reputational loss of doing so. Drawing on the firm-director interdependence perspective, we predict that director candidates' social capital and human capital have inverted U-shaped effects on their likelihood of joining a declining firm. Moreover, the declining firm's organizational social capital differently moderates the effects of candidates' social capital and human capital. Evidence from a sample of public firms under special treatment (*ST) in China supports our theoretical predictions.

Original languageEnglish (US)
Pages (from-to)901-925
Number of pages25
JournalAcademy of Management Journal
Volume64
Issue number3
DOIs
StatePublished - Jun 2021

ASJC Scopus subject areas

  • Business and International Management
  • Business, Management and Accounting(all)
  • Strategy and Management
  • Management of Technology and Innovation

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