We examine investors' preference for directors serving on fewer versus more boards (busy directors) by measuring market reaction to busy directors' resignations at the companies that still keep these directors on the board. We find a positive reaction implying a preference for fewer directorships. The reaction is more positive when the need for the director's services is greater, when the resignation frees up more of the director's time, and when the director is of higher quality. Furthermore, we find that following their resignation, directors increase their board responsibilities/leadership at firms that still retain them and seek no board appointments elsewhere.
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*Bar-Hava, email@example.com, the Hebrew University; Gu (corresponding author), firstname.lastname@example.org, the State University of New York at Buffalo School of Management; and Lev, email@example.com, New York University Stern School of Business. We thank Paul Malatesta (the editor), Robert Schonlau (the referee), and workshop participants at INSEAD, National University of Singapore, New York University, Tel Aviv University, the Hebrew University, and the 2014 Massachusetts Institute of Technology (MIT) Asia Conference in Accounting for helpful comments and suggestions. Gu thanks the financial support from the State University of New York at Buffalo.
Copyright © Michael G. Foster School of Business, University of Washington 2019.