Distracted directors: Does board busyness hurt shareholder value?

Antonio Falato (), Dalida Kadyrzhanova and Ugur Lel

Journal of Financial Economics, 2014, vol. 113, issue 3, 404-426

Abstract: We use the deaths of directors and chief executive officers as a natural experiment to generate exogenous variation in the time and resources available to independent directors at interlocked firms. The loss of such key co-employees is an attention shock because it increases the board committee workload only for some interlocked directors—the ‘treatment group’. There is a negative stock market reaction to attention shocks only for treated director-interlocked firms. Interlocking directors׳ busyness, the importance of their board roles, and their degree of independence magnify the treatment effect. Overall, directors׳ busyness is detrimental to board monitoring quality and shareholder value.

Keywords: Busy directors; Multiple directorship; Firm valuation; Independent directors; Director and CEO death (search for similar items in EconPapers)
JEL-codes: G14 G32 G34 (search for similar items in EconPapers)
Date: 2014
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (98)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:113:y:2014:i:3:p:404-426

DOI: 10.1016/j.jfineco.2014.05.005

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