NBER

Konrad Raff

Norwegian School of Economics

E-Mail: Konrad.Raff@nhh.no
Institutional Affiliation: Norwegian School of Economics

NBER Working Papers and Publications

September 2017Busy Directors: Strategic Interaction and Monitoring Synergies
with Alexander Ljungqvist: w23889
We derive conditions for when having a “busy” director on the board is harmful to shareholders and when it is beneficial. Our model allows directors to condition their monitoring choices on their co-directors' choices and to experience positive or negative monitoring synergies across firms. Whether busyness benefits or harms shareholders depends on whether directors' effort choices are strategic substitutes or complements and on the sign of the cross-firm synergies. Our empirical analysis exploits plausibly exogenous shocks that make directors busier on one board and examines how this spills over to other boards. Our results suggest that monitoring efforts typically are strategic complements, except when a firm finds itself facing a crisis. Consistent with the model, we find that busy dire...

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