Prior research has examined the firm-level performance implications of “busy” boards. Firm-level analysis, however, masks important heterogeneity in the time constraints and expertise of individual busy directors. We develop and validate shareholder voting as a proxy for shareholders’ satisfaction. Our director-specific tests provide compelling evidence that the potential costs of busy directors outweigh their benefits. At the same time, we uncover new sources of heterogeneity among busy directors. For example, the downsides are more pronounced for directors who sit on boards where fiscal year-ends cluster in the same month. Our analysis highlights the role of shareholder voting in board composition research.
Keywords: busy directors, corporate governance, board composition, shareholder satisfaction, time constraints, shareholder voting, advising, monitoring
JEL Classification: G3, G34
Suggested Citation: Suggested Citation
Chen, Kevin and Guay, Wayne R., Busy Directors and Shareholder Satisfaction (July 30, 2019). Available at SSRN: https://ssrn.com/abstract=3088814 or http://dx.doi.org/10.2139/ssrn.3088814
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