Funding Scheme

RGC Faculty Development Scheme

Project Title

Too Busy to Help? Recent Evidence on Multiple Directorships and Firm Performance in Hong Kong

Project Team (HSMC Staff) 

Dr Julia LIU, Department of Accountancy (PI)

Other Collaborating Parties


Project Period

1-1-2019 to 31-12-2020 (on-going)

Funding Amount (HKD)



Independent directors with multiple board appointments have been regarded as potentially unable to devote sufficient time and energy to their duties. In a consultation paper released in November 2017, Hong Kong Exchanges and Clearing Limited (HKEX) expressed concerns about overboarded independent non-executive directors (INEDs) and proposed a new disclosure requirement for directors who will be holding their seventh or more listed company directorship. Are INEDs with multiple directorships too busy to help? Is “seven directorships” the tipping point for serving on multiple boards? This project will examine the effect of INEDs’ multiple directorships on firm performance, using a sample from after the 2012 regulatory change for INEDs in Hong Kong.


We will address three questions. First, we will examine the effect of INEDs with multiple directorships on firm performance under the new regulatory regime. Director busyness signals director quality (quality hypothesis). However, holding too many board positions can make independent directors over-committed and thereby compromise their ability to effectively monitor management on behalf of outside shareholders (busyness hypothesis). While findings from the U.S. market suggest that multiple directorships are negatively associated with firm value, we would expect a generally positive performance effect in Hong Kong. The Hong Kong stock market is dominated by firms with concentrated ownership. Agency problems between controlling shareholders and minority shareholders are more likely to be prevalent. Controlling shareholders’ substantial involvement in the selection and appointment of independent directors may imply that INEDs with multiple directorships are less likely to be effective monitors. However, their expertise, experience, and connections likely make them excellent advisors. Thus, we would expect the quality hypothesis for busy directors to be more pronounced in Hong Kong.


Second, we will investigate how director characteristics affect performance in multiple directorships. Large geographical distances between a director and firm headquarters may exacerbate an independent director’s busyness, as attending meetings in various locations consumes more time and energy and increases the costs of gathering information. Directors with multiple board appointments may value each directorship differently and distribute their effort unequally based on the relative prestige benefits that a board offers, which are correlated with firm size. Directors with more connections have better access to information, enabling them to offer higher-quality advice to firm management. Directors’ connections (particularly political connections) help firms obtain necessary resources at a lower cost, and thus improve firm performance. 


Third, we will identify the channels through which INEDs with multiple directorships detract from or improve firm performance. We are interested in whether busy directors are more likely to attend board meetings, whether the frequency and magnitude of related party transactions tend to be lower in firms with INEDs serving on multiple boards, and whether busy directors help firms gain preferential treatment from the government or banks, such as easy access to external debt financing.


The findings from this proposed project should be of interest to regulators, boards of directors, academics, and students.