An International Study of the Value Implications of CEO External- Directorships

Abstract

We study the effect of CEO external-directorships on performance using non-US firms. We find that CEOs serving on four or more external-directorships have a detrimental effect on firm value and performance and more powerful CEOs are busier. Firms with busy CEOs trade at a 10% discount relative to the mean and their ROAs suffer 28% relative to the mean, suggesting economic significance. Our results are robust to matching and instrumental variable regressions that control for endogeneity. The evidence suggests that shareholders in countries with poor democracy, higher bureaucracy, and higher corruption should find ways to discourage excessive external-directorships of CEOs.