Multiple Board Appointments and Firm Performance in Emerging Economies : Evidence from India
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.
|Date of creation:||Jan 2005|
|Date of revision:|
|Contact details of provider:|| Postal: JG Crawford Building #13, Asia Pacific School of Economics and Government, Australian National University, ACT 0200|
Web page: http://www.eaber.org
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Anil Shivdasani & David Yermack, 1999.
"CEO Involvement in the Selection of New Board Members: An Empirical Analysis,"
Journal of Finance,
American Finance Association, vol. 54(5), pages 1829-1853, October.
- Anil Shivdasani & David Yermack, 1998. "CEO Involvement in the Selection of New Board Members: An Empirical Analysis," New York University, Leonard N. Stern School Finance Department Working Paper Seires 98-059, New York University, Leonard N. Stern School of Business-.
- Cotter, James F. & Shivdasani, Anil & Zenner, Marc, 1997. "Do independent directors enhance target shareholder wealth during tender offers?," Journal of Financial Economics, Elsevier, vol. 43(2), pages 195-218, February.
- Granovetter, Mark, 1995. "Coase Revisited: Business Groups in the Modern Economy," Industrial and Corporate Change, Oxford University Press, vol. 4(1), pages 93-130.
- Tarun Khanna & Krishna Palepu, 2000. "Is Group Affiliation Profitable in Emerging Markets? An Analysis of Diversified Indian Business Groups," Journal of Finance, American Finance Association, vol. 55(2), pages 867-891, 04.
- Benjamin E. Hermalin & Michael S. Weisbach, 1991.
"The Effects of Board Composition and Direct Incentives on Firm Performance,"
Financial Management Association, vol. 20(4), Winter.
- Hermalin, B.E. & Weisbech, M.S., 1991. "The Effects of Board Composition and Direct Incentives on Firm Performance," Papers 91-02, Rochester, Business - Financial Research and Policy Studies.
- Demsetz, Harold & Lehn, Kenneth, 1985. "The Structure of Corporate Ownership: Causes and Consequences," Journal of Political Economy, University of Chicago Press, vol. 93(6), pages 1155-77, December.
- Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
- Ira C. Harris & Katsuhiko Shimizu, 2004. "Too Busy To Serve? An Examination of the Influence of Overboarded Directors," Journal of Management Studies, Wiley Blackwell, vol. 41(5), pages 775-798, 07.
- Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, vol. 61(2), pages 689-724, 04.
- Morck, Randall & Shleifer, Andrei & Vishny, Robert W., 1988. "Management ownership and market valuation : An empirical analysis," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 293-315, January.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2000.
"Ferreting Out Tunneling: An Application to Indian Business Groups,"
NBER Working Papers
7952, National Bureau of Economic Research, Inc.
- Marianne Bertrand & Paras Mehta & Sendhil Mullainathan, 2002. "Ferreting out Tunneling: An Application to Indian Business Groups," The Quarterly Journal of Economics, Oxford University Press, vol. 117(1), pages 121-148.
- Yoshiro Miwa & J. Mark Ramseyer, 1999.
"Corporate Governance in Transitional Economies: Lessons from the Pre-War Japanese Cotton Textile Industry,"
CIRJE-F-48, CIRJE, Faculty of Economics, University of Tokyo.
- Miwa, Yoshiro & Ramseyer, J Mark, 2000. "Corporate Governance in Transitional Economies: Lessons from the Prewar Japanese Cotton Textile Industry," The Journal of Legal Studies, University of Chicago Press, vol. 29(1), pages 171-203, January.
- Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
- Klein, April, 1998. "Firm Performance and Board Committee Structure," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 275-303, April.
- Kang, Jun-Koo & Shivdasani, Anil, 1995. "Firm performance, corporate governance, and top executive turnover in Japan," Journal of Financial Economics, Elsevier, vol. 38(1), pages 29-58, May.
- William O. Brown, Jr. & Michael T. Maloney, . "Exit, Voice, and the Role of Corporate Directors: Evidence from Acquisition Performance," Claremont Colleges Working Papers 1999-27, Claremont Colleges.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Xiaonian Xu & Yan Wang, 1997. "Ownership structure, corporate governance, and corporate performance : the case of Chinese stock companies," Policy Research Working Paper Series 1794, The World Bank.
- Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, vol. 58(3), pages 1087-1112, 06.
- Core, John E. & Holthausen, Robert W. & Larcker, David F., 1999. "Corporate governance, chief executive officer compensation, and firm performance," Journal of Financial Economics, Elsevier, vol. 51(3), pages 371-406, March.
- McConnell, John J. & Servaes, Henri, 1990. "Additional evidence on equity ownership and corporate value," Journal of Financial Economics, Elsevier, vol. 27(2), pages 595-612, October.
- Jayati Sarkar & Subrata Sarkar, 2000. "Large Shareholder Activism in Corporate Governance in Developing Countries: Evidence from India," International Review of Finance, International Review of Finance Ltd., vol. 1(3), pages 161-194.
When requesting a correction, please mention this item's handle: RePEc:eab:microe:22394. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shiro Armstrong)
If references are entirely missing, you can add them using this form.