Director attention and firm value

Rex Wang Renjie; Patrick Verwijmeren

doi:10.2139/ssrn.2990292

Director attention and firm value

Rex Wang Renjie^*, Patrick Verwijmeren

^*Corresponding author for this work

Research output: Contribution to journal › Article › Academic › peer-review

7 Citations (Scopus)

Abstract

In this article, we show 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 article highlights the impact of limited director attention on the effectiveness of corporate governance and the importance of directors in keeping management active.

Original language	English
Pages (from-to)	361-387
Number of pages	27
Journal	Financial Management
Volume	49
Issue number	2
DOIs	https://doi.org/10.2139/ssrn.2990292 https://doi.org/10.1111/fima.12259
Publication status	Published - 1 Jun 2020

Bibliographical note

Funding Information:
We thank an anonymous referee, Rajkamal Iyer (editor), Marc Gabarro, Iftekhar Hasan, Mike Qinghao Mao, David S. Thomas, Francisco Urz?a, David Yermack, and seminar participants at Erasmus Research Institute of Management, Tinbergen Institute, Research in Behavioral Finance Conference (2016), and Paris Financial Management Conference (2016) for helpful comments and suggestions.

Publisher Copyright:
© 2018 Financial Management Association International

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fima.12259Final published version, 496 KBLicence: Article 25fa Dutch Copyright Act

http://hdl.handle.net/1765/112759

Cite this

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title = "Director attention and firm value",

abstract = "In this article, we show 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 article highlights the impact of limited director attention on the effectiveness of corporate governance and the importance of directors in keeping management active.",

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Director attention and firm value

Abstract

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