The effects of board size and ‘busy’ directors on the market value of Italian companies
Rent the article at a discountRent now
* Final gross prices may vary according to local VAT.Get Access
This paper presents evidence that corporate governance quality measured by (1) the board size and (2) the fraction of directors that serve on more corporate boards, influences the market value of firms. The analysis is based in Italy, a country that is characterized by family and concentrated ownership, low legal protection of investors and pyramidal firm structures. Our empirical results suggest that the level of ‘busy-ness’ of corporate directors as a measure of board effectiveness has a significant influence on firm’s market performance. By contrast, we find limited evidence that board size has a substantial impact on the market valuation, except in small and medium enterprises and in some specific industry sectors.
- Baghat, S., & Black, B. (2001). The non-correlation between board independence and long term firm performance. Journal of Corporation Law, 27, 231–274.
- Brunello, G., Graziano, C., & Parigi, B. (2001). Executive compensation and firm performance in Italy. International Journal of Industrial Organization, 19, 133–161. CrossRef
- Coles, J. W., McWilliams, V. B., & Sen, N. (2001). An examination of the relationship of governance mechanism to performance. Journal of Management, 27, 23–50. CrossRef
- Core, J. E., Holthausen, R. W., & Larcker, D. F. (1999). Corporate governance, chief executive officer compensation, and firm performance. Journal of Financial Economics, 51, 371–406. CrossRef
- Cotter, J., Shivdasani, A., & Zenner, M. (1997). Do independent directors enhance target shareholder wealth during tender offers? Journal of Financial Economics, 43, 195–218. CrossRef
- Denis, D., & Sarin, A. (1999). Ownership and board structures in publicly traded corporations. Journal of Financial Economics, 52, 187–224. CrossRef
- Fama, E. F., & Jensen, M. L. (1983). Separation of ownership and control. Journal of Law and Economics, 26, 301–325. CrossRef
- Feltham, G. A., & Ohlson, J. A. (1995). Valuation and clean surplus accounting for operating and financial activities. Contemporary Accounting Research, 11(2), 689–732.
- Ferris, S. P., Jagannathan, M., & Pritchard, A. C. (2003). Too busy to mind the business? Monitoring by directors with multiple board appointments. Journal of Finance, LVIII(3), 1087–1111. CrossRef
- Fich, E. M., & Shivdasani, A. (2006). Are busy boards effective monitors? Journal of Finance, LXI(2), 689–724. CrossRef
- Harris, I. C., & Shimizu, K., (2004). Too busy to serve? An examination of the influence of overboarded directors. Journal of Management Studies, 41(5), 775–798. CrossRef
- Hermalin, B., & Weisbach, M. (2003). Boards of directors as an endogenously determined institution: A survey of the economic literature. Economic Policy Review, 9, 7–26.
- Jiraporn, P. (2007). Too busy to show up? An analysis of directors’ absences’, Great Valley School of Graduate Professional Studies Working Paper.
- La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. W. (1997). Legal determinants of external finance. Journal of Finance, 52(3), 1131–1150. CrossRef
- Rosenstein, S. & Wyatt, J. (1990). Outside directors, board independence, and shareholder wealth. Journal of Financial Economics, 26, 175–184. CrossRef
- Shleifer, A., & Vishny, R. W. (1997). A survey of corporate governance. Journal of Finance, LII(2).
- Volpin, P. F. (2002). Governance with poor investor protection: Evidence from top executive turnover in Italy. Journal of Financial Economics, 64, 61–90. CrossRef
- Wysocki, P. D., Tuna, A. I. & Richardson, S. (2005). Accounting for taste: Board member preferences and corporate policy choices’. MIT Sloan School of Management Working Paper, December.
- Yermack, D. (1996). Higher market valuation of companies with a small board of directors. Journal of Financial Economics, 40, 185–211. CrossRef
- The effects of board size and ‘busy’ directors on the market value of Italian companies
Journal of Management & Governance
Volume 12, Issue 1 , pp 73-91
- Cover Date
- Print ISSN
- Online ISSN
- Springer US
- Additional Links
- Accounting valuation
- Corporate governance
- Board-of-directors’ size
- Number of directorships
- ‘Busy’ directors
- Industry Sectors