TY  - JOUR
AU  - Cohen,Lauren
AU  - Frazzini,Andrea
AU  - Malloy,Christopher
TI  - Hiring Cheerleaders: Board Appointments of "Independent" Directors
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 14232
PY  - 2008
Y2  - August 2008
UR  - http://www.nber.org/papers/w14232
L1  - http://www.nber.org/papers/w14232.pdf
N1  - Author contact info:
Lauren Cohen
Harvard Business School
Baker Library 273
Soldiers Field
Boston, MA 02163
Tel: 617/495-3888
E-Mail: lcohen@hbs.edu

Andrea Frazzini
AQR Capital Management, LLC
Two Greenwich Plaza, 3rd Floor
Greenwich, CT 06830
Tel: 203 742 3894
E-Mail: andrea.frazzini@aqr.com

Christopher Malloy
Harvard Business School
Baker Library 277
Soldiers Field
Boston, MA 02163
Tel: 617/495-4383
E-Mail: cmalloy@hbs.edu
AB  - We provide evidence that firms appoint independent directors who are overly sympathetic to management, while still technically independent according to regulatory definitions. We explore a subset of independent directors for whom we have detailed, micro-level data on their views regarding the firm prior to being appointed to the board: sell-side analysts who are subsequently appointed to the board of companies they previously covered. We find that boards appoint overly optimistic analysts who are also poor relative performers. The magnitude of the optimistic bias is large: 82.0% of appointed recommendations are strong-buy/buy recommendations, compared to 56.9% for all other analyst recommendations. We find that appointed analysts’ optimism is stronger at precisely those times when firms’ benefits are larger, and that appointing firms increase earnings management, and perform poorly, following these board appointments. 
ER  -