Do Multiple Directorships Stimulate or Inhibit Firm Value? Evidence from an Emerging Economy

Abstract

Purpose: This study examines the potential influence of multiple directorships on the firm value of listed firms in Jordan. Design/methodology/approach: Using a sample of 1067 firm-year observations of Jordanian listed companies from 2010 to 2020, this study applies a pooled ordinary least squares (OLS) regression model to examine the above-stated relationship. This technique was supported by conducting a Generalized Method of Moments (GMM) estimation to address the possible occurrence of endogeneity concerns. Findings: Our results show a significant negative relationship between multiple directorships and firm performance, supporting, thereby, the “Busyness Hypothesis”, which suggests that directors with multiple directorships are expected to be over-committed, too busy, and less vigilant. Thus, their ability to effectively monitor the company management on behalf of the shareholders is quite limited. Originality/value: To the best of our knowledge, this is the first study in Jordan, and one of the very rare in the Middle Eastern and North African (MENA) region, to examine the relationship between multiple directorships and firm performance. This study provides important policy and practitioner implications in the field of corporate governance by highlighting the necessity of imposing stricter limits on the number of directorships allowed for board directors. Crucially, our empirical evidence implies that limited directorships ensure that directors are able to fulfil their board responsibilities appropriately, which is significantly associated with the firm value.

Description

The file attached to this record is the author's final peer reviewed version. The Publisher's final version can be found by following the DOI link.

Keywords

Boards of directors, corporate governance, Jordan, multiple directorships, performance.

Citation

Al-Haddad, L., Gerged, A.M., Saidat, Z., Al‑Qudah, A.A. and Aziz, T. (2022) Do Multiple Directorships Stimulate or Inhibit Firm Value? Evidence from an Emerging Economy. International Journal of Accounting and Information Management, 30 (4), pp. 546-562

Rights

Research Institute

Centre for Research in Accountability, Governance and Sustainability (CRAGS)