Market Evidence on Investor Preference for Fewer Directorships

Keren Bar-Hava, Feng Gu, Baruch Lev*

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

Abstract

We examine investors' preference for directors serving on fewer versus more boards (busy directors) by measuring market reaction to busy directors' resignations at the companies that still keep these directors on the board. We find a positive reaction implying a preference for fewer directorships. The reaction is more positive when the need for the director's services is greater, when the resignation frees up more of the director's time, and when the director is of higher quality. Furthermore, we find that following their resignation, directors increase their board responsibilities/leadership at firms that still retain them and seek no board appointments elsewhere.

Original languageEnglish
Pages (from-to)931-954
Number of pages24
JournalJournal of Financial and Quantitative Analysis
Volume55
Issue number3
DOIs
StatePublished - 2020
Externally publishedYes

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