Busy Directors and the Performance of Swedish Companies

Abstract: This study examines the relationship between directors with multiple directorships and firm performance in Sweden. The purpose of the thesis is to test the hypothesis that busy directors cannot fulfill their responsibilities adequately, which in turn impairs firm performance. We run several fixed effects regressions with three different measures of busyness and return on assets and market-to-book ratio as dependent variables. Our results show that there is a negative and statistically significant relationship between busy directors and firm performance. In conclusion, our findings indicate that busy boards are less effective than non-busy boards. This suggests that shareholders should, up to a point, avoid appointing directors with too many directorships to maximize firm value.