Multiple Directorships and the Monitoring Role of the Board of Directors: Evidence from Malaysia

Abstract

This study aims to examine the relationship between multiple directorships and the monitoring role of the board of directors in Malaysian listed companies (PLC).

The effect of board multiple directorships and CEO characteristics on firm performance: evidence from Palestine

“…The finding indicates that as the multiple directorships held by each director change, no benefits arise and no costs are imposed on a company's profitability. The current results therefore contradict the findings reported by Kamardin et al (2014) that showed directors serving on multiple boards could have numerable commitments; as a result of which, they are not able to fulfill all of their responsibilities. These results contradict the agency theory and busyness hypothesis that high multiple directorships decrease the financial performance of a firm.…”

“…Researchers have provided several definitions for the concept of multiple directorships; for instance, it is defined as the number of external appointments held by directors (Kamardin et al, 2014), or directors who serve on two or more boards (Chou et al, 2014).…”

“…According to this theory, multiple directorships can be viewed as a proxy for superior director quality and directors holding positions in multiple companies have a great deal of experience to draw on which may help them to provide wise and informed recommendations as well as enhanced oversight. According to this hypothesis, directors holding multiple directorships can bring enhanced business connections, mitigate competition in the market and improve synergies in light of their expertise and insights (Kamardin et al, 2014). For example, Saleh et al (2005) found that multiple directorships lead to more control over the selection of accounting policies utilized for the preparation of financial statements, higher earnings equality and a greater level of expertise and reputation among monitors.…”

“…The practice of multiple directorships is common in a majority of companies and it occurs when the director/chief executive officer (CEO) occupies a position on two or more boards (Haniffa and Hudaib, 2006). Studies which examine multiple directorships have mainly focused on the relationship between multiple directorships and the directors' ability to successfully fulfill their responsibilities (Chiranga and Chiwira, 2014;Fich and Shivdasani, 2006;Haniffa and Hudaib, 2006;Kamardin et al, 2014). In this regard, the extent to which multiple directorships influence the performance of the firm has largely been ignored.…”

“…This study unlike other studies on multiple directorship practices focuses on the multiple positions held by different types of directors (all directors, independent directors and executive directors) as recommended by Kamardin et al (2014). Also, it responds to a call by Mohd et al (2016) for studies to examine different directorship types owing to the varying levels of importance that they have for the different firm activities; in this regard, the present study carries out an assessment of the effect of different types of multiple directorships on the financial performance of PSE-listed firms.…”