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Are busy boards detrimental?

Author

Listed:
  • Field, Laura
  • Lowry, Michelle
  • Mkrtchyan, Anahit

Abstract

Busy directors have been widely criticized as being ineffective. However, we hypothesize that busy directors offer advantages for many firms. While busy directors may be less effective monitors, their experience and contacts arguably make them excellent advisors. Among IPO firms, which have minimal experience with public markets and likely rely heavily on their directors for advising, we find busy boards to be common and to contribute positively to firm value. Moreover, these positive effects of busy boards extend to all but the most established firms. Benefits are lowest among Forbes 500 firms, which likely require more monitoring than advising.

Suggested Citation

  • Field, Laura & Lowry, Michelle & Mkrtchyan, Anahit, 2013. "Are busy boards detrimental?," Journal of Financial Economics, Elsevier, vol. 109(1), pages 63-82.
    • Handle: RePEc:eee:jfinec:v:109:y:2013:i:1:p:63-82
    DOI: 10.1016/j.jfineco.2013.02.004
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    More about this item

    Keywords

    Corporate Governance; Board of Directors; Initial public offerings; Venture capital;
    All these keywords.

    JEL classification:

    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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