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Are Busy Boards Detrimental?

55 Pages Posted: 25 Jul 2011 Last revised: 20 Nov 2012

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics

Michelle Lowry

Drexel University

Anahit Mkrtchyan

Northeastern University - D’Amore-McKim School of Business

Date Written: November 20, 2012

Abstract

Busy directors have been widely criticized as being ineffective. However, we hypothesize that busy directors offer advantages for many firms. While busy directors may be less effective monitors, their experience and contacts arguably make them excellent advisors. Among IPO firms, which have minimal experience with public markets and likely rely heavily on their directors for advising, we find busy boards to be common and to contribute positively to firm value. Moreover, these positive effects of busy boards extend to all but the most established firms. Benefits are lowest among Forbes 500 firms, which likely require more monitoring than advising.

Keywords: Corporate governance, IPO, Board of directors, venture capital

JEL Classification: G24, G34, K22

Suggested Citation

Field, Laura Casares and Lowry, Michelle and Mkrtchyan, Anahit, Are Busy Boards Detrimental? (November 20, 2012). Available at SSRN: https://ssrn.com/abstract=1894776 or http://dx.doi.org/10.2139/ssrn.1894776

Laura Casares Field

University of Delaware - Alfred Lerner College of Business and Economics ( email )

419 Purnell Hall
Newark, DE 19716
United States
302-831-3810 (Phone)

Michelle B. Lowry (Contact Author)

Drexel University ( email )

Philadelphia, PA 19104
United States
215-895-6070 (Phone)

Anahit Mkrtchyan

Northeastern University - D’Amore-McKim School of Business ( email )

360 Huntington Ave.
Boston, MA 02115
United States

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