The Return on Human Capital: the Case of UK Non-executive Directors that are also Executive Directors

This paper studies the relationship between directors' human capital and the company's performance. In particular, we focus on the effect of non-executive directors who are also executive in other firms (independent executives, IE). The analysis is based on a unique dataset of publicly traded firms in the UK which we obtain by matching Extel Financial and Corporate Register data. Our results suggest a positive relationship between the presence of IE on corporate board and company performance. The effect is stronger IEs come from well performing firms. Additionally, the similarity of industries plays a role.