Busy commissioners and firm performance: evidence from Indonesia

Abstract

PurposeUsing the Indonesian setting where the government formally limits the presence of busy commissioners, the authors investigate whether a board containing busy commissioners could be beneficial or detrimental for firm performance.Design/methodology/approachThe authors propose an econometric model focusing on the impact of busy commissioners on the firm's profitability. The authors are also interested in investigating whether the effect is different between small and large firms and between mature and non-mature firms. A sample of 392 Indonesian listed firms from 2014 to 2020 is used in this study.FindingsThe authors find a negative association between busyness and performance and this result is robust across different estimations and econometrics strategies. The authors also document that the negative impact of busy directors diminishes particularly in young and small firms. The authors also find that the impact is more pronounced in state-owned firms.Practical implicationsFrom a firm point of view, the result suggests that the companies should be aware that appointing busy commissioners in the board structure can detriment market-based performance. The listed firms should also understand that busy commissioners are inefficient, especially if these firms are large, mature and state-owned.Originality/valueTo the best of the authors’ knowledge, this is the first study investigating the relation between busy commissioners and performance by considering age, firm size and state-owned firms as a moderator in a sample of Indonesian listed firms.