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Are busy boards detrimental?

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Author Info

  • Field, Laura
  • Lowry, Michelle
  • Mkrtchyan, Anahit
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 109 (2013)
    Issue (Month): 1 ()
    Pages: 63-82

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    Handle: RePEc:eee:jfinec:v:109:y:2013:i:1:p:63-82

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Corporate Governance; Board of Directors; Initial public offerings; Venture capital;

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    References

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    Cited by:
    1. Andreou, Panayiotis C. & Louca, Christodoulos & Panayides, Photis M., 2014. "Corporate governance, financial management decisions and firm performance: Evidence from the maritime industry," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 63(C), pages 59-78.
    2. Sun, Jerry & Liu, Guoping, 2014. "Audit committees’ oversight of bank risk-taking," Journal of Banking & Finance, Elsevier, vol. 40(C), pages 376-387.
    3. Masulis, Ronald W. & Mobbs, Shawn, 2014. "Independent director incentives: Where do talented directors spend their limited time and energy?," Journal of Financial Economics, Elsevier, vol. 111(2), pages 406-429.
    4. Drobetz, Wolfgang & von Meyerinck, Felix & Oesch, David & Schmid, Markus, . "Is Board Industry Experience a Corporate Governance Mechanism?," Working Papers on Finance 1401, University of St. Gallen, School of Finance.

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