Board meetings dynamics and information diffusion

Research Question/Issue: This paper provides novel evidence on the dynamics of board meetings and the economic value of their decisions. We exploit a unique regu- latory requirement of the Italian Stock Exchange that mandates the publication of board meeting minutes when the board votes on “price sensitive” matters to analyze detailed data about directors' participation, discussions, voting, and the dissemination of their decisions to the market. Research Findings/Insights: In a large, multiyear sample of board meeting minutes, we show previously unavailable patterns of board meetings participation and discus- sion and highlight the moderating role of key governance mechanisms that shed novel light on the effectiveness of boards. Looking at the economic value of board meetings, we document significant delays in the diffusion of information in the mar- ket that may be indicative of information leakage. Theoretical/Academic Implications: We contribute to the theoretical discussion about the role of boards. Our results are consistent with a supervisory approach model of boards where consensus is high and dissent is costly. However, they cast doubt on the efficacy of boards as a counterbalancing mechanism to the power of executives. Practitioner/Policy Implications: Boards have grown in size and become increasingly complex. This study documents the actual discussion, participation, and voting dynamics of board meetings and provides evidence on the diffusion of information to market participants, which is valuable in the design of efficient corporate governance mechanisms.