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‟ financial reporting conservatism in South Asia (Bangladesh, India, Pakistan, and Sri Lanka). The paper applied Basu (1997) asymmetric timeliness measure of conditional conservatism for a sample of 93 banks stock listed banks of the four countries. We 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). We also find an optimal level of multiple directorships at which directors influence the most on financial reporting conservatism. In further analysis, the study finds evidence that directors with multiple directorships (DWMDs) in banks with high insolvency risk follow accounting conservatism. The findings of this study remain robust when we modify the definition of multiple directorships and control for multiple directorships by bank chairs and insolvency risk under alternative settings.