Directors with multiple directorships and accounting conservatism: Evidence from banks in South Asia

This study investigates the effect of directors with multiple directorships on banks’ accounting conservatism in South Asia (Bangladesh, India, Pakistan and Sri Lanka). Based on 93 banks, I find that the relationship between directors with multiple directorships and accounting conservatism is an inverse ‘U’ shape. That is, at a low level of multiple directorships, banks follow conservatism in financial reporting (reputation effect), then at a high level of multiple directorships reporting conservatism declines (busyness effect). I also find an optimal level of multiple directorships at which directors influence the most on financial reporting conservatism. The findings of this study remain robust when I modify the definition of multiple directorships and control for multiple directorships by bank chairs and insolvency risk under alternative settings.