Board busyness and firm productivity

Abstract

PurposePrior studies provide mixed evidence on the association of board busyness and firm productivity. Thus, this paper empirically analyzes how board busyness affects firm productivity.Design/methodology/approachTo measure board busyness, this paper computes the percentage of directors on a board who sit on three or more boards. Furthermore, to calculate firm productivity, the paper employs data envelopment analysis.FindingsFindings demonstrate that the association of board busyness and firm productivity (association) is generally negative and statistically significant but economically insignificant. In this respect, the findings reveal that the association is negative (positive) and both statistically and economically significant for firms having higher monitoring (advising) needs. Moreover, the findings demonstrate that regulatory oversight (1) weakens the general negative association; (2) changes the direction of association from negative to positive, for firms having higher monitoring needs; and (3) does not influence the association, for firms having higher advising needs.Originality/valueTaken together, the findings indicate that the association of board busyness and firm productivity is conditional to monitoring/advising needs and regulatory oversight. As such, the findings enrich the current debates on the association. Furthermore, the findings offer novel perspectives to enrich the regulatory frameworks of countries which are constraining multiple directorships.