Multiple Board Seats Research Articles

이사 후보에 대한 의결권 반대 사유와 이사회 효율성 및 기업가치와의 관계

We examine the relationship between dissent in director elections and board effectiveness. In our analysis, we categorize reasons for dissenting in board votes into prior irresponsible behavior, lack of independence, lack of past attendance, and serving on multiple board seats. We find that having a director who faced dissent on a board of directors reduces board effectiveness, especially in cases involving inside directors who have prior irresponsible behavior on their records, inside directors who serve on multiple boards, and outside directors who lack independence. Moreover, having a director who faced dissent on a board is negatively associated with corporate value. We also find that having a nominating committee that is composed only of outside directors has a moderating effect on this negative association between dissent in director elections and board effectiveness(firm value). We find similar results in an analysis of proxyvoting advice offered by an advisory firm. Our results suggest the importance of incorporating a wider range of board-member characteristics beyond such commonly used measures as outside director ratios and gender diversity.

Persistence in corporate networks through boards of directors? A longitudinal study of interlocks in France, Germany, and the United Kingdom

This article studies, over the period 2006 to 2019, both the structure and the evolution of corporate networks built on shared board directors between the largest listed firms of three European countries: France, Germany, and the United Kingdom. It offers a longitudinal and up-to-date analysis of the state of links between companies through examining interlocking directorates. Contrary to previous studies which have emphasized a decline of interlocks when analyzed at the board director level, we observe relative stability of these networks at the corporate level with a number of connected firms remaining quite stable despite a decline of board ties. As a result, the most central companies remain mainly the same at the national and international level over the considered period. Our findings provide evidence for the resource perspective: access to key resources seemingly pushes firms to continue their network participation despite strengthened national regulations on directors with multiple board seats. This evolution echoes the concept of weak ties of Granovetter (Am J Sociol 78: 360–1380, 1973). Lastly, it is worth noting that it cannot be affirmed that there has been an emergence of a cross-national network which operates to substitute national board ties.

Born Elite, Always Elite? How Board Chairs Gain Access to the Inner Circle of the Corporate Elite

In this study we examine the effects of board chairs’ social class background on becoming a part of the inner circle of the corporate elite. We define the inner circle to consist of those directors best connected among the upper echelons by holding multiple board seats. In line with sociological research we argue that individuals with an upper class upbringing are more likely to be part of the inner circle of the corporate elite. Through an upper class upbringing directors learn the implicit social codes dominating behavior in the inner circle of the corporate elite and are therefore able to swiftly interact within this sublime circle. We further argue that disadvantages arising from not being socialized with such elite social codes can partly be compensated by offering superior qualification, i.e. a high level of human capital. Understanding the interacting dynamics of social class background and human capital might be a step towards opening the corporate elite to more diverse backgrounds.

Outside directors, firm life cycle, corporate financial decisions and firm performance

We investigate whether directors with multiple outside board directorships are related to corporate financial strategy across firm life cycle stages. Using a large sample of firms from the Gulf Cooperation Council (GCC) countries, we find that when the number of directors with multiple board seats increases, firms' level of cash holdings rises, capital expenditure declines, selling, general and administrative (SG&A) expenses increase, and firm performance decreases. We further demonstrate how the relationship varies across different stages of their life cycle. Our findings have significant implications for policy makers, regulators and stockholders in GCC countries and in other emerging markets.

The role of directors with multiple board seats and earnings quality: A Singapore context

AbstractThis article explores whether multiple directorships has an influence on earnings management for Singaporean publicly listed firms. This article attempts to determine whether boards with multiple directorships are effective monitors and able deterrents of earnings management activities. Drawing on resource dependence theory, the results suggest that directors with multiple board seats will be able to tap on external resources for information, skills, and financial resources using their board connectedness. Data analysis is based on publicly listed firms on Singapore Stock Exchange (SSE) with a final pooled sample of 1,404 firm‐year observations from 2015 to 2018. Findings of this study show that with a higher level of multiple directorships, there is a significant negative relationship with the level of earnings management, where earnings management is measured by Dechow et al. (The Accounting Review, 1995, 70, 193–225) Modified Jones model and the Kothari et al. (Journal of Accounting and Economics, 2005, 39, 163–197) performance‐adjusted model. We also find that firms in Singapore that have a higher number of multiple directorships on its board, will have a lower level of tolerance on income‐increasing earnings manipulation. Notable secondary findings of this study include a significant negative relationship between the proportion of female directors on the board with the level of earnings management (income‐increasing manipulations). Additionally, it is found that the engagement of Big Four auditors has no significant relationship with the level of earnings management in the context of Singaporean firms. This study has significant implications and contributions to the theoretical applications and policy reforms, specifically pertaining to the Singapore Code of Corporate Governance on the issue of multiple directorships.

The determinants and effects of board committees

The governance reforms of 2003 require corporate boards to establish various committees. This paper studies how these committees are structured and the corresponding impacts. I find that independent directors with long tenures and multiple board seats tend to multitask and sit on more committees. The firms that multitask their independent directors are associated with comparatively low CEO compensation and high ROA. In particular, the benefits of multitasking independent directors are more pronounced in firms with long-tenured CEOs. I contribute to the literature by showing that board performance depends not only on the directors' identities, but also on their task assignments.

The Determinants and Effects of Board Committees

The governance reforms of 2003 require corporate boards to establish various committees. This paper studies how these committees are structured and the corresponding impacts. I find that independent directors with long tenures and multiple board seats tend to multitask and sit on more committees. The firms that multitask their independent directors are associated with comparatively low CEO compensation and high ROA. In particular, the benefits of multitasking independent directors are more pronounced in firms with long-tenured CEOs. I contribute to the literature by showing that board performance depends not only on the directors' identities, but also on their task assignments.

The Death of the Inner Circle: Understanding the Perpetuation of the Corporate Elite

While the inner circle has traditionally been operationalized based upon degree centrality, governance reforms have hindered the ability for directors to hold multiple board seats. Thus, researcher...

Busy boards and earnings management – an Australian perspective

PurposeThe purpose of this paper is to assess whether multiple directorships have an influence on earnings management for Australian publicly listed firms. This paper attempts to determine whether boards with multiple directorships are effective monitors and are able to constrain earnings management activities.Design/methodology/approachThe study adopts resource dependency theory on the relationship between multiple directorships and the extent of earnings management. Data analysis is based on publicly listed firms on Australian Stock Exchange utilising SIRCA database with a final pooled sample of 1,815 firm-year observations from 2008 to 2012.FindingsUsing different measures of multiple directorships, it is found that firms having board of directors with multiple directorships exhibit lower levels of earnings management. The results validate the applicability of resource dependency theory on the relationship between multiple directorships and the extent of earnings management suggesting that directors with multiple board seats by sharing experiences, skills, information and other resources limit the extent of earnings management by firms. Evidence also suggests that earnings management behaviour is more pronounced in larger firms compared to smaller firms and as predicted, industry audit specialists restrain earnings management activities.Practical implicationsThis study introduces methodological enhancements to the literature as it measures the multiple directorships in a number of different ways. Firms may be encouraged to actively seek board members with diverse backgrounds, international exposure/experience and pertinent skill-sets with multiple board memberships. These benefits will assist firms to determine the optimal board composition that will enable it to function effectively.Originality/valueEmpirical studies on the association between multiple directorships and earnings management in Australia are scarce and this paper provides an update of the effect of multiple directorships on earnings quality in Australia.

Are Busy Directors Harmful or Helpful? Evidence from the Great Recession

We contribute to the debate on the costs and benefits of busy directors by investigating the effect of busy directors on firm value during a stressful time, i.e. during the Great Recession. Our results show that busy directors improve firm value significantly during the financial crisis. In particular, a rise in directors’ busyness by one standard deviation results in an improvement in Tobin’s q by 6.41%. Directors with multiple board seats appear to help firms navigate the crisis more successfully, supporting the notion that multiple board seats signal higher quality. Outside the crisis period, however, we find that busy directors reduce firm value, consistent with many prior studies. Our results are crucial as they show that governance mechanisms function differently during stressful times than they do during normal times. Firms should exercise great caution before imposing limits on outside board seats on their directors.

Are Busy Directors Harmful or Helpful? Evidence from the Great Recession

Abstract We contribute to the debate on the costs and benefits of busy directors by investigating the effect of busy directors on firm value during a stressful time, i. e. during the Great Recession. Our results show that busy directors improve firm value significantly during the financial crisis. In particular, a rise in directors’ busyness by one standard deviation results in an improvement in Tobin’s q by 6.41 %. Directors with multiple board seats appear to help firms navigate the crisis more successfully, supporting the notion that multiple board seats signal higher quality. Outside the crisis period, however, we find that busy directors reduce firm value, consistent with many prior studies. Our results are crucial as they show that governance mechanisms function differently during stressful times than they do during normal times. Firms should exercise great caution before imposing limits on outside board seats on their directors.

Do OECD‐type governance principles have economic value for Vietnamese firms at IPO?

AbstractManuscript TypeEmpiricalResearch QuestionUsing agency and resource dependency insights this paper examines first which type of firm‐level antecedents trigger the adoption of OECD‐type governance principles by Vietnamese listed firms at IPO. Subsequently this paper investigates whether the adoption of these governance principles leads to higher firm values at IPO and whether stricter governance is related to transparency after IPO.Research FindingsWith respect to the antecedents of OECD‐type governance in Vietnam this study finds that firms with foreign shareholders and younger firms adopt these governance principles. The adoption of stricter governance principles, especially in terms of strict supervisory board independence, as well as the appointment of directors with multiple director seats are beneficial for firm value at IPO. Governance transparency after IPO is unrelated to a firm's governance characteristics but positively associated with increasing firm size.Theoretical/Academic ImplicationsThe results show that agency insights are applicable in a context of concentrated ownership, low investor protection and weak enforcement, since stricter board independence leads to higher firm value. In addition resource dependence theory explains the choice of directors and provides evidence that boards with better network potential lead to higher firm value in this relationship‐based emerging market.Practitioner/Policy ImplicationsVietnamese firms benefit from higher value at IPO when they adopt stricter internal governance mechanisms and appoint directors holding multiple board seats. However, to ensure compliance with governance and transparency principles, formal institutional changes related to stricter enforcement of the regulation are of utmost importance.

Multiple directorships and the performance of mergers & acquisitions

The question of whether an outside director with multiple board seats creates value for a firm is a subject of continued debate in the corporate governance literature. Dozens of studies have investigated this linkage over the past decades. Unfortunately, the findings generated to date are inconclusive and contradictory. This study reconciles conflicting perspectives by synthesizing the existing insights and knowledge, and develops a new three-stage S-shaped curve proposition. We target firms’ merger and acquisition (M&A) activities to test this argument. The results show a consistent horizontal S-shaped relation between the number of directorships held per director and the wealth creation from corporate M&A investments before the enactment of the Sarbanes–Oxley Act of 2002. However, the negative relation at the highest directorship level turns insignificant in the post-SOX period, suggesting that the mandatory changes by SOX may mitigate the negative impact of overboarded directors. This study contributes to the on-going debate on the performance effect of multiple directorships by providing a more complete assessment of the full range of the advantages and disadvantages across different levels of directorships. The different association patterns found in the pre-/post-SOX periods further highlight the importance of factoring in regulative environmental change when making an inference about the effect of multiple directorships.

Going overboard? On busy directors and firm value

The literature disagrees on 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. We find evidence that (1) the disparate results in prior work stem from differences in both sample composition and empirical design, (2) on balance the results suggest 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.

CEO and Chairperson characteristics and firm performance

This paper focuses on the relationship between Chief Executive Officer (CEO) and Chairperson characteristics and firm performance. Specifically, the study examines the association between the characteristics of the CEO and the Chairperson of the board and firm performance. Using a sample of S&P 500 firms, the evidence found suggests that demographic and experience-related characteristics may be associated with the market valuation and financial performance of the firm. In particular, the reported results indicate a positive relationship between the presence of female CEOs or Chairs and firm performance, thus suggesting that gender-based differences may affect the CEO’s/Chairperson’s success. Moreover, the findings concerning the age of the CEO or Chair are mixed, while their experience and quality appear positively related to firm performance. Interestingly, a CEO or Chairperson holding multiple board seats is negatively associated with firm performance, whereas CEO duality has a positive relationship with Tobin’s Q and the return on assets (ROA) of the firm.

Going Overboard? On Busy Directors and Firm Value

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.

Ineffective corporate governance: Director busyness and board committee memberships

Our paper examines whether holding multiple outside board seats compromises a director’s ability to effectively perform monitoring duties. Analyzing over 1400 firms, we report that individuals who hold more outside directorships serve on fewer board committees. The relation, however, appears non-linear, U-shaped, and in support for both the busyness and the reputation hypotheses. In addition, we find that holding more outside board seats decreases the likelihood of membership on compensation and audit committees. The findings substantiate evidence [Akhigbe, A., Martin, A.D., 2006. Valuation impact of Sarbanes–Oxley: Evidence from disclosure and governance within the financial services industry. Journal of Banking and Finance 30 (3), 989–1006] of value relevance of board committee structures. Additional analysis of committee memberships suggests that women and ethnic minorities are placed on more board committees. Also, directors on smaller and independent boards serve on more committees. Finally, it appears that the Sarbanes–Oxley act had a material impact on the association between the number of multiple board seats and committee memberships.

Too busy to show up? An analysis of directors’ absences

This study contributes to the debate on the benefits and costs of multiple directorships by investigating the impact of multiple directorships on board meeting attendance. Individuals with multiple board seats (or “busy” directors) exhibit a higher tendency to be absent from board meetings. The results are robust even after controlling for firm-specific characteristics, board of directors structure and endogeneity. Furthermore, our results do not support the hypothesis that directors with higher ownership stakes are more motivated to attend board meetings. Monetary inducements such as board meeting fees and annual director retainers do not appear to enhance attendance. Finally, the enactment of the Sarbanes-Oxley Act (SOX) appears to have a material impact on board attendance.

Too Busy to Show Up? An Analysis of Directors' Absences

This study contributes to the debate on the benefits and costs of multiple directorships by investigating the impact of multiple directorships on board meeting attendance. Individuals with multiple board seats (or busy directors) exhibit a higher tendency to be absent from board meetings. The results are robust even after controlling for firm-specific characteristics, board-of-directors structure and endogeneity. Furthermore, our results do not support the hypothesis that directors with higher ownership stakes are more motivated to attend board meetings. Monetary inducements such as board meeting fees and annual director retainers do not appear to enhance attendance. Finally, the enactment of the Sarbanes-Oxley Act appears to have a material impact on board attendance.

Analyzing Ineffective Corporate Governance: Director Busyness and Board Committee Memberships

The benefits and costs of directors holding multiple board seats continue to be debated in the literature. We contribute to the debate by examining whether holding multiple outside board seats compromises directors' ability to effectively perform their monitoring duties. Analyzing over 40,000 observations of individual director data across more than 1,400 firms, we report that, by and large, individuals holding more outside directorships serve on fewer board committees. The relation, however, appears to be non-linear and U-shaped indicating some support for both the busyness and the reputation hypotheses. In addition, we find that holding more outside board seats decreases the likelihood of a board member being on a greater number of work-heavy and specialized committees such as compensation and audit committees. The findings substantiate evidence (Akhigbe and Martin 2006) on value relevance of board committee structures. Additional analysis of committee memberships suggests that women and ethnic minorities are placed on more board committees. In addition, directors on smaller and independent boards serve on more committees. Finally, it appears that the Sarbanes-Oxley Act had material impact on the association between the number of multiple board seats and the committee memberships.