Influence of the overload of the board of directors on the market value and performance of brazilian publicly-held capital companies
Abstract
Objective: The present study aimed to examine the influence of board of directors' overload on the valuation and performance of Brazilian publicly traded companies.
Method: This study identified the existence of board overload through a census-like approach, in addition to describing the performance of variables related to the relative market value of corporations compared to their book value. Panel data was utilized for data analysis. The econometric models employed treated performance variables as endogenous and the measure of overload as exogenous.
Originality/Relevance: This research is relevant as it seeks to delve into the limited literature in Brazil regarding Busy Boards. Moreover, the study's approach encompasses an alternative perspective by developing an alternative metric for identifying and measuring boards involved in overload. Lastly, this is a fruitful investigation as it should assist regulatory bodies and the community dedicated to the study of Financial Accounting and Finance in understanding patterns related to board behavior.
Results: The findings provide significant evidence that, in the Brazilian context, the Reputation Hypothesis stands out over the Overload Hypothesis. Consequently, the study suggests that the greater the overload of board members, the better the operational performance, and consequently, the market value of companies.
Theoretical/Methodological/Practical Contributions: Given the results presented, companies could disclose the overload of their members and board of directors, contributing to the decision-making process of individual and institutional investors, thereby reducing the level of information asymmetry. In this context, the present study aligns with the understanding of the number of corporate interconnections among board members, shedding light on whether the existence of corporate interconnections is detrimental to company performance and valuation, thus enabling positive externalities for the Brazilian economy.
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References
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