Busy Directors and Shareholder Satisfaction

56 Pages Posted: 20 Dec 2017 Last revised: 1 Aug 2019

See all articles by Kevin D. Chen

Kevin D. Chen

University of Pennsylvania - Accounting Department

Wayne R. Guay

University of Pennsylvania - Accounting Department

Date Written: July 30, 2019

Abstract

Prior research has examined the firm-level performance implications of “busy” boards. Firm-level analysis, however, masks important heterogeneity in the time constraints and expertise of individual busy directors. We develop and validate shareholder voting as a proxy for shareholders’ satisfaction. Our director-specific tests provide compelling evidence that the potential costs of busy directors outweigh their benefits. At the same time, we uncover new sources of heterogeneity among busy directors. For example, the downsides are more pronounced for directors who sit on boards where fiscal year-ends cluster in the same month. Our analysis highlights the role of shareholder voting in board composition research.

Keywords: busy directors, corporate governance, board composition, shareholder satisfaction, time constraints, shareholder voting, advising, monitoring

JEL Classification: G3, G34

Suggested Citation

Chen, Kevin and Guay, Wayne R., Busy Directors and Shareholder Satisfaction (July 30, 2019). Available at SSRN: https://ssrn.com/abstract=3088814 or http://dx.doi.org/10.2139/ssrn.3088814

Kevin Chen

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
Philadelphia, PA 19104
United States

Wayne R. Guay (Contact Author)

University of Pennsylvania - Accounting Department ( email )

3641 Locust Walk
1329 Steinberg-Dietrich Hall
Philadelphia, PA 19104-6365
United States
215-898-7775 (Phone)
215-573-2054 (Fax)

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