Director Attention and Firm Value

44 Pages Posted: 22 Jun 2017 Last revised: 12 Nov 2018

See all articles by Rex Wang Renjie

Rex Wang Renjie

Vrije Universiteit Amsterdam; Tinbergen Institute

Patrick Verwijmeren

Erasmus University Rotterdam (EUR)

Date Written: November 12, 2018

Abstract

This paper shows that exogenous director distraction affects board monitoring intensity and leads to a higher level of inactivity by management. We construct a firm-level director "distraction'' measure by exploiting shocks to unrelated industries in which directors have additional directorships. Directors attend significantly fewer board meetings when they are distracted. Firms with distracted board members tend to be inactive and experience a significant decline in firm value. Overall, this paper highlights the impact of limited director attention on the effectiveness of corporate governance and the importance of directors in keeping management active.

Keywords: director attention, firm value, busy board, corporate governance

JEL Classification: G02, G34

Suggested Citation

Wang, Renjie and Verwijmeren, Patrick, Director Attention and Firm Value (November 12, 2018). Available at SSRN: https://ssrn.com/abstract=2990292 or http://dx.doi.org/10.2139/ssrn.2990292

Renjie Wang (Contact Author)

Vrije Universiteit Amsterdam ( email )

De Boelelaan 1105
Amsterdam, 1081 HV

Tinbergen Institute ( email )

Burg. Oudlaan 50
Rotterdam, 3062 PA
Netherlands

Patrick Verwijmeren

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
357
Abstract Views
1,879
Rank
153,517
PlumX Metrics