Busy Directors and Firm Performance: Evidence from Mergers

60 Pages Posted: 5 Apr 2017 Last revised: 24 Apr 2017

Roie Hauser

Harvard Law School

Date Written: October 1, 2016

Abstract

This paper studies whether director appointments to multiple boards impact firm outcomes. To overcome endogeneity of board appointments, I exploit variation generated by mergers that terminate entire boards and thus shock the appointments of those terminated directors. Reductions of board appointments are associated with higher profitability, market-to-book, and likelihood of directors joining board committees. The performance gains are particularly stark when directors are geographically far from firm headquarters. I conclude that the effect of the shocks to board appointments is: (i) evidence that boards matter; and (ii) plausibly explained by a workload channel: when directors work less elsewhere, their companies benefit.

Keywords: Board of directors, Board composition, Busy boards, Corporate governance

JEL Classification: G34, J22

Suggested Citation

Hauser, Roie, Busy Directors and Firm Performance: Evidence from Mergers (October 1, 2016). Journal of Financial Economics (JFE), Forthcoming; Fox School of Business Research Paper No. 17-011. Available at SSRN: https://ssrn.com/abstract=2945206

Roie Hauser (Contact Author)

Harvard Law School ( email )

1563 Massachusetts Avenue
Cambridge, MA 02138
United States

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