37 Pages Posted: 25 Apr 2012 Last revised: 18 Apr 2017
Date Written: March 1, 2012
The literature disagrees on the link between so-called busy boards (where many independent directors hold multiple board seats) and firm performance. Some argue that busyness certifies a director’s ability and that such directors are value enhancing. Others argue that “over-boarded” directors are ineffective and detract from firm value. We find evidence that 1) the disparate results in prior work stem from differences in both sample composition and empirical design, 2) on balance the results suggest a negative association between board busyness and firm performance, and 3) the inclusion of firm fixed effects dramatically affects the conclusions drawn from, and the explanatory power of, multivariate analyses. We also explore alternative empirical definitions of what constitutes a busy director and find that commonly used proxies for busyness perform well relative to more complex alternatives.
Keywords: Corporate governance; Boards of directors; busy directors
JEL Classification: G30; G34; G39
Suggested Citation: Suggested Citation
Cashman, George D. and Gillan, Stuart and Jun, Chulhee, Going Overboard? On Busy Directors and Firm Value (March 1, 2012). Journal of Banking and Finance, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2044798 or http://dx.doi.org/10.2139/ssrn.2044798