What determines the gain and loss of multiple audit committee directorships? A longitudinal analysis

Purpose - This study aims to examine year-to-year changes in the number of audit committee (AC) directors’ multiple AC directorships to understand what factors determine the number of their AC directorships each year and their gain and loss of AC appointments from one year to the next. Moreover, this study investigates whether AC directors with these factors are demanded more by firms with high monitoring demands. Design/methodology/approach - Using a longitudinal dataset of AC director-year observations in the USA from 2004 to 2017, this study uses Poisson and ordinary least squares (OLS) regression to examine whether the “governance expertise” of an AC director is associated with the number of AC directorships. Also, logistic and conditional logistic regressions are estimated to examine whether the governance expertise of an AC director is associated with a net increase or net decrease in the number of AC directorships. In an additional analysis using firm-year observations for the same period, OLS regression is estimated to examine whether firms with a high monitoring demand are positively associated with the percentage of AC directors with multiple AC directorships, as well as those who further possess strong governance expertise. Findings - Directors’ governance expertise is positively associated with the total number and a net increase in the number of AC directorships, and negatively associated with a net decrease in the number of AC directorships. Additional analysis reveals that firms with high monitoring demands are positively associated with a greater percentage of AC directors with multiple AC directorships, and those who further possess strong governance expertise. Originality/value - This study contributes to the literature by utilizing director-year level data rather than firm-year level data typically used in prior studies, providing a more granular understanding of the dynamics influencing AC directorships. The findings provide policy-relevant insights, highlighting the importance of evaluating AC directors’ governance expertise. These results could guide the refinement of existing disclosure requirements regarding multiple AC directorships, encouraging a nuanced approach to ensure effective oversight.