Director attention and firm value

Rex Wang Renjie*, Patrick Verwijmeren

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review

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 languageEnglish
Pages (from-to)361-387
JournalFinancial Management
Volume49
Issue number2
DOIs
Publication statusPublished - 1 Jan 2019
Externally publishedYes

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