Events

I examine the determinants and consequences of board busyness. Regarding determinants, I find that board busyness decreases with firms’ monitoring demand and increases with their advising demand. I also find that agency problems and labor market frictions are associated with greater board busyness. Further, firms with high advising and low monitoring demands tend to adopt more lenient policies goveming director busyness. To examine implications, 1 separate board busyness into the demand-based component (explained by firms’ combined advising and monitoring demand), the overboarding component (explained by agency problems and labor market frictions), and the remaining unexplained component. I find consistently positive associations between the demand-based component and firm performance. In contrast, the association between the overboarding component and firm performance is negative. Finally, I exploit negative shocks to busyness at director-interlocked firms induced by M&A activity. 1find that the effect of these negative shocks on director-interlocked firms’ performance decreases with firms’ advising demand and increases with firms’ monitoring demand. Collectively, the results suggest that the composition of board busyness, not its level per se, has important performance implications. My findings do not support one-size-fits-all limits on board busyness.