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Busy Directors and Shareholder Satisfaction

Published online by Cambridge University Press:  13 August 2019

Kevin D. Chen  and
Wayne R. Guay
Kevin D. Chen
Affiliation:
Chen, [email protected]
Wayne R. Guay*
Affiliation:
Guay, [email protected], University of Pennsylvania
*
Guay (corresponding author), [email protected]
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Abstract

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.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 55 , Issue 7 , November 2020 , pp. 2181 - 2210
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2019

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Footnotes

We thank Jennifer Altamuro, Jere Behrman, Fabrizio Ferri, Susanna Gallani (discussant), Paul Malatesta (the editor), Shane Murphy, Daniel Taylor, Ken Teoh, and Ralph Walkling (the referee) for helpful discussions and suggestions. We also thank seminar participants at the American University of Cairo, Tulane University, The Wharton School, and the 2018 FARS Midyear Meeting. We gratefully acknowledge financial support from the Wharton School of the University of Pennsylvania.

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