Distracted directors: Does board busyness hurt shareholder value?

Falato, Antonio; Kadyrzhanova, Dalida; Lel, Uǧur

doi:10.1016/j.jfineco.2014.05.005

Cited by 295 publications

(194 citation statements)

References 30 publications

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“…On the other hand, agency theory argues that qualified women directors tend to hold multiple directorships (Sealy, Vinnicombe, & Singh, ). This “director busyness” has a negative impact on their ability to provide their monitoring and advisory roles, increasing agency problems and thereby reducing firm value (Falato, Kadyrzhanova, & Lel, ; Faleye, Hoitash, & Hoitash, ; Field, Lowry, & Mkrtchyan, ). Women and ethnic minorities may lack the necessary level of skills, qualifications, and experience required for directorship (Terjesen et al, ).…”

Section: Theoretical Frameworkmentioning

confidence: 99%

Board diversity, corporate governance, corporate performance, and executive pay

2018

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Departing from previous studies, this paper investigates the impact of corporate board diversity on corporate performance and executive pay within the context of Middle East and North African countries. Our sample includes a balanced panel of 600 firm‐year observations, consisting of 100 individual firms drawn from five Middle Eastern countries (Egypt, Jordan, Oman, Saudi Arabia, and United Arab of Emirates) over the 2009–2014 period. The findings are three‐fold. First, board diversity, as measured by director gender and nationality, has a positive effect on corporate financial performance. Second, the relationship between board diversity and corporate performance is stronger in better governed firms than their poorly governed counterparts. Finally, board diversity, as measured by director gender, ethnicity, and nationality, enhances the pay‐for‐performance sensitivity but not the actual executive pay. Our results suggest that decisions about board diversity are not merely influenced by moral values; they arise because of the cost–benefit considerations of what diversity can bring to the firm. The findings are robust to controlling for different alternatives of board diversity measures, corporate governance proxies, corporate outcomes, and types of endogeneities.

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Section: Theoretical Frameworkmentioning

confidence: 99%

Board diversity, corporate governance, corporate performance, and executive pay

2018

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“…Several recent studies suggest that too many directorships could impair the monitoring ability of independent directors (e.g. Core et al, 1999;Fich and Shivdasani, 2006;Cashman et al, 2012;Falato et al, 2014;Sun and Liu, 2014). Hence, we argue that although holding multiple directorships certifies a director's talent and reputation, sitting on numerous boards constrains independent directors' ability to perform as effective monitors because of overcommitment.…”

Section: Busy Independent Directors and Ceo Paymentioning

confidence: 67%

“…Although our presumptions of busy (overlap) directors as bad (good) monitors are based on prior studies (e.g. Core et al, 1999;Fich and Shivdasani, 2006;Cashman et al, 2012 andFalato et al, 2014), we have endeavoured to remove such concerns by evaluating 'excess compensation' instead.…”

Section: Results For Excess Ceo Paymentioning

confidence: 99%

“…Hence, we argue that although holding multiple directorships certifies a director's talent and reputation, sitting on numerous boards constrains independent directors' ability to perform as effective monitors because of overcommitment. Thus, leaning towards the findings of Falato et al (2014), Sun and Liu (2014), Cashman et al (2012) and Fich and Shivdasani (2006), we consider a director who holds three or more board memberships to be 'busy' and not an effective monitor. Our hypotheses are as follows:…”

Section: Busy Independent Directors and Ceo Paymentioning

confidence: 99%

“…Following Falato et al (2014) and Fich and Shivdasani (2006), we view busy directors as poor monitors of firm managers. 7 In our robustness tests in Subsection '6.3', we use an unrestricted measure of busy directors.…”

Section: Measures Of Busy and Overlap Independent Directorsmentioning

confidence: 99%

See 2 more Smart Citations

How do ‘busy’ and ‘overlap’ directors relate to CEO pay structure and incentives?

Pathan

Wong

Benson

2017

Accounting & Finance

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We examine how CEO compensation is affected by the presence of busy and overlap directors. We find that CEOs at firms with more busy directors receive greater total pay, fixed salary and equity-linked pay and exhibit higher payperformance (delta) and pay-risk (vega) sensitivities. Our results also suggest that CEOs at firms with more overlap directors take smaller total pay and equity-linked pay and reveal lower delta and vega. We further show that the impact of busy and overlap directors on CEO pay is more visible for firms with less complexity and low information acquisition cost.

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Are superstar directors effective in corporate social responsibility performance? An empirical analysis of sustainable development goals

Cheng

2022

Corp Soc Responsibility Env

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In this paper, I adopt a hand-collected sample of prestigious business award-winner directors based on four types of awards and use it to represent reputable directors.I examine how awardee directors influence corporate social responsibility performance (CSR) using multiple samples. The results show that with award-winner directors sitting on their boards, firms tend to have higher CSR scores. The findings are consistent in the propensity score matched sample and additional robustness tests. The findings suggest that reputable directors are effective in performing monitoring and advising duties, which in turn leads to better CSR performance.

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Distracted directors: Does board busyness hurt shareholder value?

Cited by 295 publications

References 30 publications

Board diversity, corporate governance, corporate performance, and executive pay

Board diversity, corporate governance, corporate performance, and executive pay

How do ‘busy’ and ‘overlap’ directors relate to CEO pay structure and incentives?

Are superstar directors effective in corporate social responsibility performance? An empirical analysis of sustainable development goals

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