Too Busy or Well-Connected? Evidence from a Shock to Multiple Directorships

55 Pages Posted: 12 May 2018 Last revised: 26 May 2018

See all articles by Anna Bergman Brown

Anna Bergman Brown

University of Connecticut - Department of Accounting

Jing Dai

CUNY Baruch College

Emanuel Zur

University of Maryland - Robert H. Smith School of Business

Date Written: February 1, 2018

Abstract

Prior literature documents that multiple directorships are negatively associated with operating performance due to overly busy directors; however, multiple directorships may also increase firm value because directors gain access to valuable connections, resources, and information through their multiple appointments. This paper examines M&A that terminate target firms’ entire boards as a negative shock to both board busyness and connections at other firms, as a complement to Hauser (2017). We document that firms experiencing a decrease in multiple directorships due to M&A exhibit improved operating performance, monitoring, and strategic advising on average. Firms with the smallest decrease in board connections experience the greatest improvement in operating performance and advising, while firms with the greatest decrease in board connections experience null or negative effects on operating performance and advising. Our findings provide new evidence of the costs and benefits of multiple directorships, depending on the level of board connections.

Keywords: Board, Monitoring, Advising, Connection

JEL Classification: M41

Suggested Citation

Brown, Anna Bergman and Dai, Jing and Zur, Emanuel, Too Busy or Well-Connected? Evidence from a Shock to Multiple Directorships (February 1, 2018). The Accounting Review, Forthcoming, University of Connecticut School of Business Research Paper No. 18-20, Available at SSRN: https://ssrn.com/abstract=3162614 or http://dx.doi.org/10.2139/ssrn.3162614

Anna Bergman Brown

University of Connecticut - Department of Accounting ( email )

School of Business
Storrs, CT 06269-2041
United States

Jing Dai

CUNY Baruch College ( email )

17 Lexington Avenue
New York, NY 10021
United States

Emanuel Zur (Contact Author)

University of Maryland - Robert H. Smith School of Business ( email )

College Park, MD 20742-1815
United States

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