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Do Multiple Directorships Signal Quality? Evidence from Independent Directors
Adrian C. H. Lei1; Jie Deng2
2014
Source PublicationJournal of International Financial Management & Accounting
ISSN1467-646X
Volume25Issue:2
Abstract

This paper studies the effect of independent directors’ multiple directorships (MDs) on firm value and examines the countervailing effects of quality and “busyness.” Using a unique panel data set covering all Hong Kong‐listed firms, we find that despite independent directors’ busyness, there is a strong and positive relation between the number of MDs of independent directors and firm value. We also find, however, that the positive effect of MDs declines at higher levels of busyness. We find that the effects of MDs on firm value are stronger under better corporate governance standards. We show that independent non‐executive directors (INEDs) with a CEO position underperform because of busyness. After the requirement of increasing the minimum number of INEDs in Hong Kong from 2004, the quality effect of MDs seems to be reduced, implying the policy may have increased the busyness of some INEDs. Our results are robust to a range of estimation procedures, including alternative MD and firm‐performance measurements, and 2SLS. Our empirical evidence suggests that highly engaged independent directors still improve firm value and supports increasing the minimum requirement for the fraction of independent directors, even under a supply constraint of qualified directors.

DOIhttps://doi.org/10.1111/jifm.12017
Language英語English
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Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Affiliation1.Department of Finance and Business Economics, Faculty of Business Administration,University of Macau, Av. Padre Tomas Pereira, Taipa, Macau, China
2.College of Business, Department of Accountancy, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong, SAR
First Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Adrian C. H. Lei,Jie Deng. Do Multiple Directorships Signal Quality? Evidence from Independent Directors[J]. Journal of International Financial Management & Accounting,2014,25(2).
APA Adrian C. H. Lei,&Jie Deng.(2014).Do Multiple Directorships Signal Quality? Evidence from Independent Directors.Journal of International Financial Management & Accounting,25(2).
MLA Adrian C. H. Lei,et al."Do Multiple Directorships Signal Quality? Evidence from Independent Directors".Journal of International Financial Management & Accounting 25.2(2014).
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