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    Monitoring capabilities of busy and overlap directors: Evidence from Australia

    Access Status
    Fulltext not available
    Authors
    Fernández Méndez, C.
    Pathan, Md Shams Tabrize
    Arrondo García, R.
    Date
    2015
    Type
    Journal Article
    
    Metadata
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    Citation
    Fernández Méndez, C. and Pathan, S. and Arrondo García, R. 2015. Monitoring capabilities of busy and overlap directors: Evidence from Australia. Pacific Basin Finance Journal. 35 (Part A): pp. 444-469.
    Source Title
    Pacific Basin Finance Journal
    DOI
    10.1016/j.pacfin.2015.05.006
    ISSN
    0927-538X
    Faculty
    Faculty of Business and Law
    School
    School of Economics, Finance and Property
    URI
    http://hdl.handle.net/20.500.11937/76643
    Collection
    • Curtin Research Publications
    Abstract

    © 2015 Elsevier B.V. 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.

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