Is Busy Really Busy? Board Governance Revisited

Forthcoming Journal of Business Finance & Accounting

42 Pages Posted: 14 Mar 2010 Last revised: 5 Jan 2017

Christian Andres

WHU - Otto Beisheim School of Management

Inga van den Bongard

University of Mannheim - Finance Area

Mirco Lehmann

University of Bonn

Multiple version iconThere are 2 versions of this paper

Date Written: September 30, 2013

Abstract

We investigate the relationship between firm governance and the board’s position in the social network of directors. Using a sample of 133 German firms over the four-year period from 2003 to 2006, we find that firms with intensely connected supervisory boards (1) are associated with lower firm performance, and (2) pay their executives significantly more. We interpret these results as evidence of poor monitoring in firms with directors who are more embedded in the social network. In both cases, simple measures for busy directors that were used by other studies in the past fail to show any significant pattern. The findings suggest that the quality and structural position of additional board seats may play a bigger role than simply the number of board appointments.

Keywords: Director Network, Busy Board, Agency Theory, Executive Compensation

JEL Classification: G30, G38

Suggested Citation

Andres, Christian and van den Bongard, Inga and Lehmann, Mirco, Is Busy Really Busy? Board Governance Revisited (September 30, 2013). Forthcoming Journal of Business Finance & Accounting. Available at SSRN: https://ssrn.com/abstract=1569531 or http://dx.doi.org/10.2139/ssrn.1569531

Christian Andres (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Inga Van den Bongard

University of Mannheim - Finance Area ( email )

Mannheim, 68131
Germany

Mirco Lehmann

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

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