Understanding the Determinants of Board Busyness and the Relation Between Busyness and Performance

• In Event: Corporate Directors

Abstract

In this paper, I examine the relation between board busyness and firm performance while considering the differing characteristics of firms and board committees. At the firm level, I separate board busyness into the demand-based component (explained by firms’ heterogeneous advising and monitoring demands) and the deviation component (explained by differing forces that drive board busyness to deviate from optimal levels), and investigate the association between these components and firm performance. I find consistently negative (positive) associations between the deviation component (demand-based component) and firm performance. At the committee level, I find that the nominating (audit) committee busyness is negatively (positively) related to performance, suggesting that committees with more (less) discretion to deviate from optimal levels are more (less) likely to be over-committed. Collectively, my findings do not support the current call for setting mandatory one-size-fits-all limits of board busyness.

Author

• Tongqing Ding, University of Colorado Boulder