Ineffective corporate governance: Director busyness and board committee memberships

Pornsit Jiraporn, Manohar Singh, Chun I. Lee

Research output: Contribution to journalArticle

92 Scopus citations

Abstract

Our paper examines whether holding multiple outside board seats compromises a director's ability to effectively perform monitoring duties. Analyzing over 1400 firms, we report that individuals who hold more outside directorships serve on fewer board committees. The relation, however, appears non-linear, U-shaped, and in support for both the busyness and the reputation hypotheses. In addition, we find that holding more outside board seats decreases the likelihood of membership on compensation and audit committees. The findings substantiate evidence [Akhigbe, A., Martin, A.D., 2006. Valuation impact of Sarbanes-Oxley: Evidence from disclosure and governance within the financial services industry. Journal of Banking and Finance 30 (3), 989-1006] of value relevance of board committee structures. Additional analysis of committee memberships suggests that women and ethnic minorities are placed on more board committees. Also, directors on smaller and independent boards serve on more committees. Finally, it appears that the Sarbanes-Oxley act had a material impact on the association between the number of multiple board seats and committee memberships.

Original languageEnglish (US)
Pages (from-to)819-828
Number of pages10
JournalJournal of Banking and Finance
Volume33
Issue number5
DOIs
StatePublished - May 1 2009

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

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