Busy directors and firm performance: Evidence from Australian mergers

We examine the impact of busy directors on firm performance in Australia. We do so by exploiting the exogenous reduction in board appointments generated by mergers that terminate target boards, replicating Hauser (2018)’s U.S. study. When using the entire sample of Australian publicly listed firms, we do not find significant changes in firm performance for firms that experience a reduction in board appointments. However, when partitioning the sample by firm size, we find increases in return on assets and Tobin's q for large Australian firms where their directors lose seats on acquired boards. The results show director appointments influence the performance of large Australian firms via a workload channel, in a similar way to S&P1500 U.S. firms. However, there is a need to consider the negative effects of board connections lost for the smaller Australian listed firms.