Distracted Directors and Firm Value

While a large number of publicly traded firms in the United States limit the number of multiple directorships held by their board members, the empirical evidence on whether director busyness has any effect on the firm is mixed. While several studies find that “busy” directors are associated with lower firm valuations and less effective monitoring, others either find no such association or offer mixed evidence. This report presents the findings of an experiment examining the shareholder wealth effects of an external increase in the demand for outside directors’ time, providing evidence that independent director busyness matters for firm value.