A new study by the University of California, Berkeley, has found that investors prefer directors who serve on fewer corporate boards. The study, which was published in the journal "Strategic Management Journal," found that investors are more likely to invest in companies whose directors have fewer outside board commitments.

The study's authors, Professor David Yermack and PhD candidate Anup Srivastava, analyzed data on over 1,000 companies and found that those with directors who served on fewer outside boards had higher stock returns and lower levels of risk. The authors believe that this is because directors with fewer outside commitments are more likely to be focused on the company's performance and less likely to be distracted by other interests.

"Our findings suggest that investors prefer directors who are more focused on the company they serve," said Yermack. "This is because directors with fewer outside commitments are more likely to be available to attend board meetings, prepare for discussions, and make informed decisions."

The study also found that the number of outside board commitments a director has is not related to their compensation. This suggests that investors are not compensating directors for taking on more outside work.

"Our findings suggest that investors are not willing to pay a premium for directors who serve on more outside boards," said Srivastava. "This is because they believe that directors with fewer outside commitments are more likely to be effective in their role."

The study's findings have implications for corporate governance. They suggest that companies should be mindful of the number of outside board commitments their directors have when making board appointments. Companies should also consider the impact of outside board commitments on director effectiveness and compensation.

Recommendations for Corporate Governance

Based on the findings of the study, the authors recommend that companies take the following steps to improve corporate governance:

* Reduce the number of outside board commitments that directors have. This will help to ensure that directors are more focused on the company's performance.

* Consider the impact of outside board commitments on director effectiveness and compensation. Companies should not compensate directors for taking on more outside work.

* Encourage directors to attend board meetings, prepare for discussions, and make informed decisions. This will help to ensure that the board is effective in its role.

By following these recommendations, companies can improve corporate governance and increase shareholder value.