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Multiple board appointments and firm performance in emerging economies: Evidence from India

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  • Jayati Sarkar

    ()
    (Indira Gandhi Institute of Development Research)

  • Subrata Sarkar

    ()
    (Indira Gandhi Institute of Development Research)

Abstract

The relation between multiple directorships, busy directors and firm performance has been researched predominantly in the context of developed economies, notably the US. This paper extends the existing literature on multiple directorships in two ways; first, by providing additional evidence on its effect on firm performance, but with respect to an emerging economy, India, and secondly, by suggesting an alternative measure of directorial "busyness" that is more general in its applicability compared to those that have been applied in the existing literature. Using a sample of 500 large firms from the Indian corporate sector for the year 2002-03, the paper finds multiple directorships by independent directors to correlate positively with firm value thereby supporting the "quality hypothesis" that busy directors are likely to be better directors, a result that is different from the existing evidence on busy directors. Multiple directorships by insider directors are, however, negatively related to firm performance. Estimation of group and non-group companies separately reveals that the quality effect of independent directors persists for the former but disappears for the latter. In general, the results suggest that the relation between "busy" directors and firm performance may depend on the institutional context and on the type of director

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Bibliographic Info

Paper provided by Indira Gandhi Institute of Development Research, Mumbai, India in its series Indira Gandhi Institute of Development Research, Mumbai Working Papers with number 2005-001.

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Length: 34 pages
Date of creation: Jan 2005
Date of revision:
Handle: RePEc:ind:igiwpp:2005-001

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Keywords: Multiple Directorships; Busy Directors; Firm Performance;

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Cited by:
  1. Pramod, Kumar Naik & Krishnan, Narayanan & Puja, Padhi, 2012. "R&D intensity and market valuation of firm: a study of R&D incurring manufacturing firms in India," MPRA Paper 37299, University Library of Munich, Germany.
  2. Jayati Sarkar & Subrata Sarkar, 2010. "Auditor and audit committee independence in India," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2010-020, Indira Gandhi Institute of Development Research, Mumbai, India.
  3. Emilia Peni, 2014. "CEO and Chairperson characteristics and firm performance," Journal of Management and Governance, Springer, vol. 18(1), pages 185-205, February.
  4. Jasmin Joecks & Kerstin Pull & Karin Vetter, 2013. "Gender Diversity in the Boardroom and Firm Performance: What Exactly Constitutes a “Critical Mass?”," Journal of Business Ethics, Springer, vol. 118(1), pages 61-72, November.
  5. Glenn Boyle & Glenn Boyle and Xu (Jane) Ji, 2011. "New Zealand Corporate Boards in Transition: Composition, Activity and Incentives Between 1995 and 2010," Working Papers in Economics 11/36, University of Canterbury, Department of Economics and Finance.
  6. Ahn, Seoungpil & Jiraporn, Pornsit & Kim, Young Sang, 2010. "Multiple directorships and acquirer returns," Journal of Banking & Finance, Elsevier, vol. 34(9), pages 2011-2026, September.
  7. Marc Essen & J. Oosterhout & Michael Carney, 2012. "Corporate boards and the performance of Asian firms: A meta-analysis," Asia Pacific Journal of Management, Springer, vol. 29(4), pages 873-905, December.
  8. Lee, Shih-Cheng & Lin, Chien-Ting & Chang, Pei-Ting, 2011. "An Ohlson valuation framework for valuing corporate governance: The case of Taiwan," Pacific-Basin Finance Journal, Elsevier, vol. 19(4), pages 420-434, September.

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