Purpose – The purpose of this paper is to investigate the relationship between the industry relatedness of directors’ multiple directorships and corporate governance effectiveness. The authors posit that a director gains “beneficial experience” by serving on outside boards of companies in related industries, with a resulting increase in governance effectiveness. Conversely, they predict a decrease in governance effectiveness when directors serve on outside boards of companies in unrelated industries. Design/methodology/approach – Using publicly available data, a Tobit regression model is used to examine the effect of the industry relatedness of board members’ multiple directorships on corporate governance effectiveness. Findings – The results demonstrate a significant positive correlation between the industry relatedness of directors’ multiple directorships and corporate governance effectiveness. It was found that this industry relatedness effect is stronger for directors of small companies than large company directors. The paper also documents a significant negative effect on governance effectiveness for small firms whose directors increase their board service on non-industry-related boards. Originality/value – Prior research has examined the “Busyness Hypothesis” and the “Experience Hypothesis” as mutually exclusive hypotheses. This paper extends prior research by examining the possibility that the two hypotheses are not competing, but rather that both an experience effect and a busyness effect may be present for directors serving on multiple boards, and that one of the effects will dominate the other, based on certain company-specific characteristics.

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Numerous research studies have examined the use of financial accounting data in the prediction of corporate bankruptcy. Partly due to a lack of available data, however, little work has been done in developing a closure prediction model specifically for hospitals. Using cost reports from the Health Care Financing Administration and a sample of 7 1 closed hospitals and a matched sample of 71 open hospitals, the current study examines the relationship between 21 financial accounting ratios and hospital closure. Univariate logit results indicate that hospital closure is significantly related to 17 of the 21 ratios one year prior to closure. Results are also presented using a multivariate model, and for the relationships two years prior to closure. The current study provides information helpful to users in identifying financial variables which may be important indicators of hospital closure.