We gratefully acknowledge Professor Robert Faff (the editor) and an anonymous reviewer for providing insightful comments and suggestions.
Are Multiple Directorships Beneficial in East Asia?
Article first published online: 22 DEC 2012
© 2012 The Authors Accounting and Finance © 2012 AFAANZ
Accounting & Finance
Volume 54, Issue 3, pages 999–1032, September 2014
How to Cite
Lee, K.-W., Lee, C.-F. (2014), Are Multiple Directorships Beneficial in East Asia?. Accounting & Finance, 54: 999–1032. doi: 10.1111/acfi.12008
- Issue published online: 23 SEP 2014
- Article first published online: 22 DEC 2012
- Manuscript Accepted: 25 OCT 2012
- Manuscript Received: 22 JUN 2012
- Multiple directorships;
- Ownership structure;
- Firm performance
We posit that the benefits and costs of multiple directorships are conditional on firm characteristics. We find firm valuation is positively associated with multiple directorships in (i) firms with high advising needs and (ii) firms with high external financing needs. These beneficial effects of multiple directorships are generally stronger in countries with weak shareholder rights and in firms that are widely held. However, when controlling shareholder hold high voting-rights to cash-flow rights, multiple directorships reduce firm valuation, especially in countries with weak shareholder rights and in closely held firms. As multiple directorships increases, cash holdings (capital expenditures) contribute less to shareholder value. The negative association between value of cash (capital expenditure) and busy boards is mitigated in firms with (i) high advising needs, (ii) high external financing needs and (iii) less entrenched ownership structures.