Abstract
There is disagreement in the literature regarding the link between so-called busy boards (where many independent directors hold multiple board seats) and firm performance. Some argue that busyness certifies a director’s ability and that such directors are value enhancing. Others argue that “over-boarded” directors are ineffective and detract from firm value. Our analysis suggests that 1) the disparate results in prior work stem from differences in both sample composition and empirical design, 2) our results are supportive of prior work suggesting a negative association between board busyness and firm performance, and 3) the inclusion of firm fixed effects dramatically affects the conclusions drawn from, and the explanatory power of, multivariate analyses. We also explore alternative empirical definitions of what constitutes a busy director and find that commonly used proxies for busyness perform well relative to more complex alternatives.
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