Director attention and firm value
This paper shows that exogenous director distraction affects board monitoring intensity and leads to a higher level of inactivity by management. We construct a firm-level director "distraction'' measure by exploiting shocks to unrelated industries in which directors have additional directorships. Directors attend significantly fewer board meetings when they are distracted.
Firms with distracted board members tend to be inactive and experience a significant decline in firm value. Overall, this paper highlights the impact of limited director attention on the effectiveness of corporate governance and the importance of directors in keeping management active.
|Keywords||director attention, firm value, busy board, corporate governance|
|JEL||Financial Economics (jel G02), Mergers; Acquisitions; Restructuring; Corporate Governance (jel G34)|
|Persistent URL||dx.doi.org/10.2139/ssrn.2990292, hdl.handle.net/1765/112759|
Verwijmeren, P, & Wang, R. (2018). Director attention and firm value. Financial Management, accepted. doi:10.2139/ssrn.2990292