Are Busy Boards Effective Monitors?

Fich, Eliezer M.; Shivdasani, Anil

doi:10.1007/978-3-642-31579-4_10

Cited by 264 publications

(238 citation statements)

References 39 publications

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“…The results remain qualitatively the same. This finding is consistent with prior studies (Core et al 1999;Fich and Shivdasani 2006;Sarkar et al 2008;Field et al 2013), which highlight the inability of busy directors to fulfil their monitoring responsibilities.…”

Section: Resultssupporting

confidence: 92%

“…They conclude that even if busy directors might offer quality advice, they do not function as effective monitors of management. Prior studies, like Core et al (1999) and Fich and Shivdasani (2006), also highlight the fact that busy boards are associated with weaker profitability and lower values for the firm. In the Indian context, Sarkar et al (2008) conclude in their study that the quality of the board is a more important deterrent for earnings management than mere independence.…”

Section: Impact Of Director Busyness On Earnings Managementmentioning

confidence: 92%

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Board Characteristics, Firm Profitability and Earnings Management: Evidence from India

Kapoor

Goel

2016

Australian Accounting Review

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The present paper explores the association between earnings management and specific board characteristics and the firm's profitability in the Indian context. In India, the corporate ownership model is the promoter dominated shareholders model. This is the first study based on a panel data framework that employs a fixed effect model to control for time‐invariant endogeneity. It also contributes to the literature by exploring the role of the firm's profitability in transmitting the impact of audit committee independence on earnings management. The study finds that profitability is an important variable, as it moderates the association between audit committee independence and earnings management. Managers of a profit‐making company would have little need to modify their earnings. This signifies that independent audit committees are more effective monitors of earnings management in profitable firms than in non‐profitable firms. Independent directors with multiple directorships are also found to be ineffective monitors. The findings are of material significance to policymakers in analysing board effectiveness and earnings management and improving policymaking for corporate governance by using profitability and related variables.

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Section: Resultssupporting

confidence: 92%

Section: Impact Of Director Busyness On Earnings Managementmentioning

confidence: 92%

Board Characteristics, Firm Profitability and Earnings Management: Evidence from India

Kapoor

Goel

2016

Australian Accounting Review

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“…Board independence is likely to provide monitoring incentives, because a board with a high proportion of outsiders (board officers who are independent of the network member firms) will have less to lose from scrutinizing and evaluating management. Insiders (board officers who are employed with any of the network member firms) on the board may have disincentives to monitor, whereas outside officers do not and, in fact, are interested in making fair and comprehensive evaluations to protect their own reputational capital (Fich and Shivdasani, 2006). As such, the agency framework associates an independent board with higher performance.…”

Section: Network Board Characteristics and Network Performancementioning

confidence: 99%

“…Acknowledging these differences in younger and more mature networks, we argue that the positive effects of board characteristics that provide boards with incentives to monitor will have their greatest effects when the network is young. First, board independence, represented by a high proportion of outsiders on the board, was argued above as useful for performance because it can mitigate insiders' claims for coordinating roles in the network, limit biased decisions in terms of resource distributions, and minimize disincentives to correct free-riding behaviour (Fich and Shivdasani, 2006). In a more mature network, these problems are not as evident as they are in young networks.…”

Section: The Moderating Effects Of Network Maturitymentioning

confidence: 99%

Managing Maturing Government‐Supported Networks: The Shift from Monitoring to Embeddedness Controls

Wincent

Thorgren

Anokhin

2012

British J of Management

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In formal inter-firm networks backed with significant financial support by policymakers, network boards are typically established to monitor network activities and to manage the tension between organizational and collective interests. This approach to network governance, however, builds mainly upon agency logic. We integrate agency with embeddedness theory to offer insights into the effectiveness of monitoring as a governance mechanism as networks mature and member firms become embedded. The analyses focus on two issues: (1) how network board characteristics typically associated with monitoring -board independence, board size and board compensation -influence network performance; and (2) how these effects are moderated by network age. The model is tested with longitudinal data on 53 government-supported networks. In addition to the direct effects of board characteristics, network board size and board compensation have a stronger positive impact on network performance in younger networks than in more mature networks. This study provides insight into why the instituting of boards may prove successful for network-level performance in newly formed government-supported networks, but also explains why the positive effects from network board monitoring may diminish as networks grow older.

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“…They find that following a negative firm outcome, directors lose more directorships when the outcome occurs at one of their more prestigious directorships. This director reputation evidence shows that contrary to some of the literature on director busyness (e.g., Fich and Shivdasani, 2006), IDs with multiple board seats do not treat their directorship responsibilities equally, but instead allocate more of their valuable time and energy to their more prestigious boards.…”

Section: Supply Of Independent Director Servicesmentioning

confidence: 56%

A Survey of Recent Evidence on Boards of Directors and CEO Incentives

Masulis

2020

Asia-Pac J of Fin Stud

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This article surveys the recent literature on boards of directors and the interplay between director incentives and CEO incentives. The primary focus is on how the incentives and other characteristics of directors, boards, and CEOs interact to affect firm performance. The article reviews the recent evidence documenting a causal relationship between board independence and measures of firm performance. It also discusses the major limitations of the current measure of director independence. Finally, the article highlights how board independence provides strong incentives for CEOs to create firm value and examines the recent evidence on what other director characteristics improve board effectiveness.

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Are Busy Boards Effective Monitors?

Cited by 264 publications

References 39 publications

Board Characteristics, Firm Profitability and Earnings Management: Evidence from India

Board Characteristics, Firm Profitability and Earnings Management: Evidence from India

Managing Maturing Government‐Supported Networks: The Shift from Monitoring to Embeddedness Controls

A Survey of Recent Evidence on Boards of Directors and CEO Incentives

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