Corporate boards and audit committees in India – The impact of independence and busyness of corporate boards and audit committees on firm performance and financial reporting quality

Abstract

The study aims to analyze the effects of multiple directorship assignments (busyness) taken up by corporate directors and audit committee members on firm performance and financial reporting quality. The key arguments of the current study are that the busyness of corporate directors can affect their independence, among other factors, and second, the phenomenon of busyness can also be used as a non-conventional measure of independence of directors. It is further argued that the effects of firm-level busyness on firm performance and financial reporting quality can be better explained when firm characteristics and other institutional settings, such as ownership structure of firms, are incorporated in comparison to the situation when the same phenomenon is explained by following limits of busyness as prescribed by the regulators. Similarly, the relation between firm performance, financial reporting quality, board member busyness and board independence have been studied in the context of India as most of the previous studies examining the similar relationship have been conducted in the context of developed markets. In addition to the above, the effects of the intensity (quality) of busyness, underlying the level of rigor and responsibilities on firm performance and financial reporting quality have also been studied in the dissertation. The empirical findings of the current dissertation provide more realistic and meaningful information novel pertaining to the effects of busyness on firm performance and financial reporting quality by applying endogenously determined levels of busyness as against exogenously prescribed busyness limits by regulators. The inclusion of the intensity of busyness provide even more relevance to the above findings.