Busy directors and firm performance: Does firm location matter?

We examine whether busy directors' impacts on firm performance vary with firm headquarter locations. We classify firms into Metro and Rural firms based on their headquarter locations. Using a sample of 11,537 firm-year observations from 1997 to 2013, we find that Metro firm busy directors significantly enhance firm performance and are associated with lower default risk, lower cash effective tax rate, lower real earnings management, and more efficient assets utilization. We further show busy independent directors enhance firm performance after the 2007-2008 financial crisis, but not in the early years after SOX. Interestingly, the results indicate that SOX compromises the effectiveness of busy inside directors in Metro firms in the post-SOX period. The location effect is robust across multiple model specifications and various measures of director busyness and Metro firms. We conclude that firm location affects the effectiveness of busy directors and Metro firms benefit more from directors with multiple directorships.