Multiple directorships of outside directors and firms’ cost behaviour: evidence from Korea
研究了韩国上市公司外部董事在多家公司任职如何影响企业成本粘性，发现多重任职能削弱成本粘性，但若外部董事在同一企业集团内多家子公司任职则无此效果。
This study examines how multiple directorships of outside directors are related to firms’ cost behaviour. Results based on a sample of Korean-listed companies from 2011 to 2017 show that the level of cost stickiness is attenuated when outside directors hold multiple directorships. However, multiple directorships do not mitigate the degree of cost stickiness that is associated with managers’ strategic response to expected future sales increase. We find evidence that the degree of cost stickiness of firms with high cash holdings can be attenuated by multiple directorships. These results suggest that outside directors who serve on multiple boards are effective at monitoring cost management of empire-building managers. Further, the level of cost stickiness is not attenuated by outside directors sitting on the boards of multiple subsidiaries within the same business group. These results suggest that outside directors’ business group affiliations undermine their monitoring roles as independent directors. This study is closely related to finance and accounting literature on economic benefits of multiple directorships or board connection. HIGHLIGHTSThe level of cost stickiness is negatively associated with multiple directorships of outside directors.-Outside directors holding multiple directorships are effective at monitoring cost decisions.-Outside directors' business group affiliations undermine their monitoring roles.