Are Busy Boards Effective Monitors?

Eliezer M. Fich () and Anil Shivdasani
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Eliezer M. Fich: Drexel University
Anil Shivdasani: University of North Carolina

A chapter in Corporate Governance, 2012, pp 221-258 from Springer

Abstract: Abstract Firms with busy boards, those in which a majority of outside directors hold three or more directorships, are associated with weak corporate governance. These firms exhibit lower market-to-book ratios, weaker profitability, and lower sensitivity of CEO turnover to firm performance. Independent but busy boards display CEO turnover-performance sensitivities indistinguishable from those of inside-dominated boards. Departures of busy outside directors generate positive abnormal returns. When directors become busy as a result of acquiring an additional directorship, other companies in which they hold board seats experience negative abnormal returns. Busy outside directors are more likely to depart boards following poor performance.

Keywords: Corporate Governance; Firm Performance; Abnormal Return; Board Size; Independent Board (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1007/978-3-642-31579-4_10

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