Are Busy Boards Effective Monitors?
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 (ARs). When directors become busy as a result of acquiring an additional directorship, other companies in which they hold board seats experience negative ARs. Busy outside directors are more likely to depart boards following poor performance. Copyright 2006 by The American Finance Association.
Year of publication: |
2006
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Authors: | FICH, ELIEZER M. ; SHIVDASANI, ANIL |
Published in: |
Journal of Finance. - American Finance Association - AFA, ISSN 1540-6261. - Vol. 61.2006, 2, p. 689-724
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Publisher: |
American Finance Association - AFA |
Saved in:
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