Board Busyness Research Articles

Does Board Supervisory Quality Enhance Corporate Social Performance?-Evidence from Taiwanese Listed Firms

This study uses Taiwanese public firms as a sample to examine if board supervisory quality enhances CSP. The present study uses four proxies for supervisory quality of board at group level: board meeting attendance rate, number of board meetings, social capital of the board and average training hours of directors. We obtain 348 CSR data from an international CSR rating agent and match them with double size non-CSR firms. We find that CSR firms exhibit significantly higher board attendance rate, board meeting frequency and board social capital than non-CSR firms. For CSR firms, board attendance rate and board meeting frequency positively impact CSR ratings, implying that board diligence is essential to monitoring management to achieve higher social objectives. However, board social capital and training significantly but negatively impact CSP, implying busy board and inexperienced board detriments CSP.Board success in CSR means directors must be passionate about the issues on CSR. Additionally, firms that are behind social agenda need to recruit resourceful directors to diversify information base for advises about stakeholder issues and trends. Firms that have taken steps in CSR activities should not recruit overly busy directors or inexperienced directors. Our paper provides both theoretical and practical implications.

Do busy directors influence the cost of debt? An examination through the lens of takeover vulnerability

We investigate the effects of board busyness on firms' cost of debt by analyzing the relationship through a hostile takeover framework. We initially establish an inverse relationship between board busyness and firms' hostile takeover vulnerability. Next, we test the relationship between board busyness and the cost of debt. Our results suggest that as the level of board busyness increases, the cost of debt decreases. Economically, the cost of debt for firms whose board is comprised of 40% busy directors is about 30bps lower, compared to those without busy directors. Our results survive extensive robustness checks and provide a positive counterpoint to the negative correlation between board busyness and firm performance.

Supervisory boards, financial crisis and bank performance: do board characteristics matter?

Failures in governance, especially in regard to boards of directors, have been blamed for the 2007–2008 financial crisis. The increased public scrutiny regarding the actions and role of the board of directors in banks, following the crisis, inspires to examine whether and to what extent the characteristics of banks’ boards influence their performance in the crisis. Using a sample of 72 publicly listed European banks, we find that banks with more independent and busy boards experienced worse stock returns during the crisis. Conversely, the better-performing banks had more banking experts serving as supervisory directors. Additionally, we find that gender and age diversity improved banks’ performance during the crisis; hence, diversity matters. We also construct a governance quality index on the basis of board characteristics and conclude that governance quality positively affects banks’ returns during the crisis. Overall, we find evidence that banks’ performance during the financial crisis is a function of their boards’ characteristics.

Determinants of European Banks’ Bailouts Following the 2007–2008 Financial Crisis

Extraordinary amounts of public funds and/or assistance were made available to banks since the onset of the 2007–8 financial crises. Governments worldwide have launched a massive bailout package to support banks in distress. Using a probit model, this article investigates the likelihood of bailouts following the financial crisis. Our results lead us to conclude that the governance characteristics of banks, specifically the characteristics of boards, bank risks, as well as bank-level and country-specific banking sector features, explain the likelihood of bailouts in the European banking sector. In particular, we find that board banking experience, longer directors’ tenure, less busy boards, and the existence of a corporate governance committee decrease the likelihood of banks participating in a bailout programme. Inversely, board independence, credit, and liquidity risks increase the probability of banks being bailed out. Furthermore, fewer limitations on banking freedom and greater openness of the banking sector have a harmful impact on the occurrence of bailouts. Our study therefore suggests relevant policy implications, which might help supervisors, regulators, and other public authorities in avoiding costly bailouts.

The value of corporate boards during the Great Depression in Belgium

We investigate how board characteristics were related to the value of listed Belgian firms in the 1928–1931 period, when investor protection was weak and firms were hit by the largest financial crisis of the 20th century. We find that firms typically had a large board and many directors held multiple directorships. Most boards included bank directors. While large, busy boards and bankers on the board were positively related to firm value before the crisis, their value significantly decreased from 1929 onwards, suggesting that these boards were less suited to face a crisis. Board busyness seems to be the main driver of negative board effects during the crisis. We also find that riskier firms which had busier and larger boards experienced a larger drop in value.

Family ownership and busy boards: impact on performance

Purpose – The purpose of this paper is to empirically assess the effect, if any, of family ownership and busy boards on companies’ Tobin’s Q and cash holdings in France. Design/methodology/approach – Using a multiple regression analysis for panel data, the author investigate the impacts of being family-owned and of multiple directorships on cash holdings and then on Tobin’s. Findings – Family ownership seems to have no significant effect. The most significant finding is that family-owned companies are smaller and work in the manufacturing and construction sectors compared to non-family-owned companies. However, multiple directorship is not negatively related to firm performance in France. Research limitations/implications – The current study focusses solely on France, which, even though different from the more usual American perspective, is not enough to make broad generalizations. It is however, a useful step toward better understanding the issues at hand. International data on family firms and busy boards, while hard to come by, would further enhance the knowledge of corporate governance. Originality/value – It is interesting to know if family-owned companies and those with multiple directorships perform differently from others, especially in a context where organizations can choose between a one-tier or two-tier system of governance, as is the case in France.

Complacency in the Face of Evolving Cybersecurity Norms is Hazardous

Constantly evolving legal requirements and changing technology, the business executives and board of directors members are often reluctant to adopt policies that require a high level of corporate-wide commitment. Expenditures on cybersecurity may not have concrete and identifiable benefits nor generate revenues. Corporate inertia with respect to implementing rigorous cyber-defense is understandable.There are very large number of unknowns. Corporate decision makers often receive a great amount of contradictory advice. The C-suite needs to think and act strategically. Cybersecurity challenges will not go away if ignored. The threat demands action and policies consistent with the corporation’s profile and its sector's norms.Failing to take such action means greater regulatory and litigation risk, irrespective of whether the cybersecurity posture adopted will be effective in defending against cyber-attacks. Noncompliance with cybersecurity norms are likely to damage the corporation’s reputation in the marketplace and with customers, suppliers, and other business partners. The corporation needs well thought out policies that include plans to respond to cyber-attacks and to recover from them.

Increased Board Independence Requirement and its Impact on Governance Inputs, Board Busyness, and Firm Performance

In response to the Sarbanes-Oxley Act and stock exchange regulation, firms are forced to increase their board independence level if they did not satisfy the requirements. This article empirically examines the impact of increased board independence requirements on the governance inputs, board busyness, as well as the firm performance. The results show that the increased independence level in the board, audit committee, nominating committee as well as compensating committee have significant impacts on the governance inputs and firm performance. The results are mixed: (1) If the firm experiences an exogenous increase in the audit committee independence, the governance inputs are aggrandized (measured by the increased number of board meetings and increased board meetings attendance), an increase in the firm performance is also observed. (2) If the company increases the total board independence level, then the number of board meetings and the firm performance increase, the board busyness status is weakened (since the number of the outside directorships decreases), but the meeting attendance record is becoming worse (directors do not attend enough meetings as required by the SEC). (3) If the enterprise increases the compensation committee independence level, the number of board meetings and firm performance will increase, but again, the meeting attendance record is worse. (4) If the firm increases the nominating committee independence level, the number of board meetings will decrease and more directors will not attend enough meetings required by the SEC. The results suggest that both the regulation authority and the enterprise need to evaluate their choice of board independence regime by taking into account the trade off between corporate governance inputs and the firm operating performance.

Busyness and advising at Borsa Istanbul firms

In this study, we investigate director busyness and advising for firms quoted at Borsa Istanbul. We show that firms prefer not to appoint directors with multiple directorships and superior advising skills to monitoring positions, potentially as a result of a trade-off between the monitoring and advising functions of directors. In addition, we find that busy boards have higher advising capacity compared to non-busy boards. Also, we show that firms that have busy boards or higher advising qualities do not perform better or worse than firms that have non-busy boards or lower advising quality. Lastly, multivariate tests suggest that there is no significant relationship between board busyness or board advising quality and firm performance.

Board busyness and crash risk: evidence from Indian stock market

This study examines the impact of board busyness (busy directors) on future stock prices crash risk. Using a large sample of Indian firms, we find that board busyness reduces future stock prices crash risk. We attribute this finding to the effectiveness of board busyness since busy directors are more experienced. We also show that busy boards are effective in standalone firms compared to firms affiliated with a business group. Lastly, we find that busy boards are positively associated with conditional accounting conservatism and therefore, accounting conservatism reduces stock prices crash risk. Overall, our results conclude that experienced directors do matter for effective monitoring in emerging stock markets.

Distracted Directors: Does Board Busyness Hurt Shareholder Value?

Distracted Directors: Does Board Busyness Hurt Shareholder Value?

Bridge and Buffer: Evidence of the Role of the Board of Directors in Family Firms

In this paper we investigate the roles that boards of directors play in family firms by conducting a series of interviews with board members from various Italian family firms. Applying Grounded Theory methodology, our results suggest that in addition to performing the service and control functions characteristic of boards of directors in non-family firms, family firm boards perform two functions unique to family firms: i.e, they act as a bridge between the various family business components and as a buffer between conflicting members. Our study makes two contributions. First, by suggesting that family business boards play bridge and buffer roles, we fill the gap in previous literature which has examined the roles of boards of directors without considering the idiosyncratic nature of family- owned businesses. Second, we offer an overview of the variability in board roles across different forms of family business.

Busyness, Independence, and Advising at Borsa Istanbul Firms

In this study, we investigate director busyness and advising for firms quoted at Borsa Istanbul. We show that firms prefer not to appoint directors with multiple directorships and superior advising skills to monitoring positions, potentially as a result of a trade-off between the monitoring and advising functions of directors. In addition, we find that busy boards have higher advising capacity compared to non-busy boards. Also, we show that firms that have busy boards or higher advising qualities do not perform better or worse than firms that have non-busy boards or lower advising quality. Lastly, multivariate tests suggest that there is no significant relationship between board busyness or board advising quality and firm performance.

Board structure: an empirical study of firms in Anglo-American governance environments

Purpose– With boards of directors playing both monitoring and guidance roles, the purpose of this paper is to examine the impact of board structure on firm value in large US and UK firms using the lenses of agency and resource dependence theories.Design/methodology/approach– Using a sample of firms in the USA and the UK from 2000 to 2007, the paper conducts a panel data analysis of the impact of board structure on firm value and examine the nuances of different governance environments.Findings– The paper finds distinct differences in the impact of board independence, board size, and outside director busyness on firm value between UK and US firms. Specifically, the paper finds that board independence, board size, and board busyness all have a significant positive impact on firm value in the UK. However, the paper finds no significant relationship between board independence and firm value among US firms. Both board size and board busyness are found to be positively associated with firm value in the USA.Social implications– The paper finds strong support for resource dependence theory in the UK but limited support for agency theory in the USA.Originality/value– This paper takes a multi-country approach to examining the impact of board structure on firm value.

Distracted directors: Does board busyness hurt shareholder value?

We use the deaths of directors and chief executive officers as a natural experiment to generate exogenous variation in the time and resources available to independent directors at interlocked firms. The loss of such key co-employees is an attention shock because it increases the board committee workload only for some interlocked directors—the ‘treatment group’. There is a negative stock market reaction to attention shocks only for treated director-interlocked firms. Interlocking directors׳ busyness, the importance of their board roles, and their degree of independence magnify the treatment effect. Overall, directors׳ busyness is detrimental to board monitoring quality and shareholder value.

Impact of corporate governance on financial disclosures: Evidence from India

The paper aims at identifying impact of corporate governance variables i.e. board structure (board size, board independence, board activity and board busyness) and ownership structure (foreign promoters holding, institutional shareholding and CEO duality) on financial disclosures made by the Indian firms. Using cross sectional data of 325 listed firms for the financial year 2009-10, we compute financial disclosure score (using 171 checklist points) based on disclosure requirements of accounting standards. We find average disclosure score of 73%, maximum and minimum being 100% and 46% respectively. Our finding support agency theory in terms of monitoring role of board since board size is found to be significant however we do not find any influence of board independence on the disclosures. The study also supports resource dependency theory in terms of outside directorship which might provide exposure to different corporate environment, brings diverse perspectives and knowledge to the directors and this in turn leads to improved disclosures. We also support the notion that having foreign promoter shareholding improves disclosures

Relation between business satisfaction and board dimensions in joint ventures between Spanish and Moroccan SMEs

Businesses commonly access new markets through joint ventures, and these partnerships may adopt diverse structures of government, among which the Board of Directors often plays a key role. Accordingly, the aim of this study is to observe which characteristics of the Board most affect the success of joint ventures between Spanish and Moroccan SMEs, operating in Morocco. Using a structured questionnaire, we analyse the characteristics of the Board that affect success, as measured by the partners’ satisfaction with the performance achieved. The results show that factors influencing overall partners’ satisfaction with the joint venture include the existence of external directors, the existence of directors with a significant level of ownership in the partnership, the existence of an audit committee, and the (low) frequency of Board meetings. All these measures can be said to be indicators of the type of control held over the partnership, as a means of ensuring the partners’ goals are achieved.

Are Busy Boards Detrimental?

Are Busy Boards Detrimental?

Distracted Directors: Does Board Busyness Hurt Shareholder Value?

This paper examines the impact of independent director busyness on firm value in a setting that addresses a key challenge that the board of directors is an endogenously determined institution. We use the deaths of directors and CEOs as a natural experiment to generate exogenous variation in the time and resources available to independent directors at interlocked firms. The sudden loss of such key co-employees is an ‘attention shock’ because it increases the board committee workload for some independent directors at the interlocked firm – the ‘treatment group’, but not others – the ‘control group’. In a hand-collected sample of 2,551 (592) firms that share a non-deceased independent director with 633 (189) firms subject to director (CEO) deaths, difference-in-differences estimates reveal that investors react negatively to these attention shocks. There is a significant negative stock market reaction of -0.79% (-0.95%) for director-interlocked firms in the treatment group, but no reaction for those in the control group. The treatment effect is significantly magnified by interlocking directors’ busyness (e.g., board size and number of outside directorships), the importance of their roles in the firm (e.g., type of committee membership), and their degree of actual independence (e.g., board classification). Overall, these results provide endogeneity-free evidence that independent directors’ busyness is detrimental to board monitoring quality and shareholder value.

Busy boards and corporate performance

PurposeThe purpose of this paper is to analyze and examine the relationship between busy boards and corporate performance in China.Design/methodology/approachBased on a sample of non‐financial listed companies in the Chinese stock market from 2007 to 2010, by defining several measures of busy board, the paper investigates the relationship between busy boards and corporate performance in China.FindingsThe paper finds many busy boards in Chinese listed companies; compared to companies without multiple directorships, the companies with multiple directorships have better corporate performance; the number of multiple directorships in boards should maintain a certain ratio, or the busy boards will be harmful to the corporate performance.Originality/valueThis is the first paper to analyze and examine the impacts of busy boards on firm performance in China directly. The findings are also useful to regulation of limiting the numbers of independent directors seated on other boards.