Articlegold2019

CEO busyness and firm performance: evidence from Indonesia

Iman Harymawan · Mohammad Nasih · Melinda Cahyaning Ratri · John Nowland

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Corporate Finance and Governance Corporate Governance and Financial Management Political Influence and Corporate Strategies

Abstract

This study investigates whether busy CEOs are associated with lower firm performance, and if this relationship is moderated by firm growth, CEO tenure and corporate governance practices in Indonesia. This study uses 876 firms-year observations from 268 firms listed on the Indonesia Stock Exchange (IDX) for the period spanning 2014 to 2017. We find that busy CEOs are associated with lower firm performance. This negative relationship is stronger in firms with high growth and when busy CEOs have shorter tenure. We also show that corporate governance practices have no impact on the negative relationship between CEO busyness and firm performance. For firms and shareholders, our findings indicate that it is not a good idea for CEOs to hold two or more outside directorships, particularly in the early years of taking up their CEO position. Our results suggest that restrictions on CEO busyness would be beneficial to shareholders.

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References

1983Separation of Ownership and Control 2008Estimating Standard Errors in Finance Panel Data Sets: Comparing Approaches 1999Corporate governance, chief executive officer compensation, and firm performance 2003Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives 2003Boards of Directors and Firm Performance: Integrating Agency and Resource Dependence Perspectives 2006Are Busy Boards Effective Monitors?2003Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments 2002CEO Characteristics and Firm R&D Spending

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