Monitoring capabilities of busy and overlap directors: evidence from Australia

Carlos Fernández Méndez, Shams Pathan and Rubén Arrondo García (2015) Monitoring capabilities of busy and overlap directors: evidence from Australia. Pacific-Basin Finance Journal, 35 Part A: 444-469. doi:doi:10.1016/j.pacfin.2015.05.006


Author Carlos Fernández Méndez
Shams Pathan
Rubén Arrondo García
Title Monitoring capabilities of busy and overlap directors: evidence from Australia
Journal name Pacific-Basin Finance Journal   Check publisher's open access policy
ISSN 0927-538X
Publication date 2015
Sub-type Article (original research)
DOI doi:10.1016/j.pacfin.2015.05.006
Open Access Status Not Open Access
Volume 35
Issue Part A
Start page 444
End page 469
Total pages 26
Place of publication Amsterdam, Netherlands
Publisher Elsevier
Collection year 2016
Language eng
Abstract We analyze the effects of multiple board directorships (busy directors) and multiple committee memberships of a board (overlap directors) on four board supervisory outcomes: CEO remuneration, external auditor opinion, audit fees and CEO turnover. Using a panel of 684 Australian listed firms from 2001 to 2011, we find that firms with busy directors pay high remunerations to their CEOs, and experience low CEO pay-performance and low CEO turnover-performance sensitivities. Our results also suggest that firms with overlap directors have a lower probability of receiving a qualified audit opinion and are able to negotiate lower payments, both to their CEOs and to the external auditors. These results hold for alternative specifications and proxies. Our results suggest that busy (overlap) directors are detrimental (beneficial) to the monitoring capability of the board and its committees. Finally, our findings suggest that the negative monitoring effect of busy directors are predominantly observed in large firms where over-commitment problems are severe, while the positive monitoring effects of overlap directors are observed in small firms where directorial positions are less time demanding.
Keyword Board
Executive remuneration
Busy directors
Overlap directors
Audit fees
Audit opinion
Pay-performance sensitivity
CEO turnover
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: Official 2016 Collection
UQ Business School Publications
 
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Created: Thu, 03 Dec 2015, 14:29:16 EST by Dr Shams Pathan on behalf of UQ Business School