Are Directors Holding Multiple Board Seats Too Busy or Well-Connected?

Directors frequently hold multiple board seats, simultaneously lending their expertise to the boards of multiple firms. Director “busyness” is often thought to be detrimental to firm performance, as it leaves directors with insufficient time to devote to their duties at each firm. However, multiple directorships also foster valuable connections among firms that facilitate the flow of information and resources across boards.

There are challenges in trying to assess whether multiple directorships are beneficial or detrimental to firm performance. For example, directors with the highest ability tend to be sought after to serve on multiple boards. These directors may perform adequately … Read more

M&A Buyers Pay a Premium for Their Weak Financial Controls

The Sarbanes-Oxley Act (SOX) was enacted by the U.S. Congress in 2002 in the aftermath of a series of corporate scandals. It aims to strengthen investor protection by promoting better corporate governance and auditor independence. In particular, Sections 302 and 404 require top management to assess and certify the effectiveness of internal controls over financial reporting and an external auditor to attest to the validity of management’s assessment. Firms that cannot do so must disclose the existence and nature of their internal control weaknesses (ICWs). While a number of academic studies have documented associations between ICWs and suboptimal corporate behaviors … Read more