Multiple Board Appointments and Firm Performance in Emerging Economies: Evidence from India

The relation between multiple directorships, busy directors and firm performance has been researched
predominantly in the context of developed economies, notably the US. This paper extends the existing
literature on multiple directorships in two ways; first, by providing additional evidence on its effect on firm
performance, but with respect to an emerging economy, India, and secondly, by suggesting an alternative
measure of directorial busyness that is more general in its applicability compared to those that have been
applied in the existing literature. Using a sample of 500 large firms from the Indian corporate sector for the
year 2002-03, the paper finds multiple directorships by independent directors to correlate positively with
firm value thereby supporting the quality hypothesis that busy directors are likely to be better directors, a
result that is different from the existing evidence on busy directors. Multiple directorships by insider
directors are, however, negatively related to firm performance. Estimation of group and non-group
companies separately reveals that the quality effect of independent directors persists for the former but
disappears for the latter. In general, the results suggest that the relation between busy directors and firm
performance may depend on the institutional context and on the type of director.