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Busy directors and firm performance: Evidence from Australian mergers

Author

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  • Daniliuc, Sorin Ovidiu
  • Li, Lingwei
  • Wee, Marvin

Abstract

We examine the impact of busy directors on firm performance in Australia. We do so by exploiting the exogenous reduction in board appointments generated by mergers that terminate target boards, replicating Hauser (2018)’s U.S. study. When using the entire sample of Australian publicly listed firms, we do not find significant changes in firm performance for firms that experience a reduction in board appointments. However, when partitioning the sample by firm size, we find increases in return on assets and Tobin's q for large Australian firms where their directors lose seats on acquired boards. The results show director appointments influence the performance of large Australian firms via a workload channel, in a similar way to S&P1500 U.S. firms. However, there is a need to consider the negative effects of board connections lost for the smaller Australian listed firms.

Suggested Citation

  • Daniliuc, Sorin Ovidiu & Li, Lingwei & Wee, Marvin, 2020. "Busy directors and firm performance: Evidence from Australian mergers," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).
    • Handle: RePEc:eee:pacfin:v:64:y:2020:i:c:s0927538x2030384x
    DOI: 10.1016/j.pacfin.2020.101434
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    References listed on IDEAS

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    Cited by:

    1. Winatha, Arvin, 2020. "Pendekatan dalam Pengukuran Firm Performance," OSF Preprints 7c3dz, Center for Open Science.
    2. Pan, Hunghua & Liao, Yi-Ping & Yu, Chen-Chiao, 2024. "Monitoring by busy compensation committee members," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1557-1568.
    3. Zhou, Chensong & Zhang, Xiangzhi & Xiong, Lingyun & Chen, Chuanyong, 2023. "Merger and acquisition performance commitments and shareholding reductions," Finance Research Letters, Elsevier, vol. 57(C).
    4. Gupta, Aparna & Owusu, Abena & Zou, Lei, 2021. "Identifying board of director network influence for firm characteristics," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 581(C).
    5. Mirosław Wasilewski & Serhiy Zabolotnyy & Dmytro Osiichuk, 2021. "Characteristics and Shareholder Wealth Effects of Mergers and Acquisitions Involving European Renewable Energy Companies," Energies, MDPI, vol. 14(21), pages 1-20, November.

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    More about this item

    Keywords

    Busy directors; Workload reduction; Board connections; Firm performance; Mergers and acquisitions; Replication;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply

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