In this paper, we extend the work of Ang et al. [J. Finance 55 (1999) 81] to large firms. We find that managerial ownership is positively related to asset utilization but does not serve as a significant deterrent to excessive discretionary expenses. Outside block ownership may only have a limited effect on reducing agency costs. Furthermore, smaller boards serve the same role, but independent outsiders on a board do not appear to protect the firm from agency costs. Thus, this paper reports complementary evidence to Ang, Cole and Lin. In large publicly traded corporations, managerial ownership significantly alleviates principal–agent conflicts even in the presence of other agency deterrent mechanisms.

Research shows that by enhancing visibility, advertising improves stock liquidity and returns. Unlike stock holders, bond holders may view advertising skeptically. Without proven effectiveness in improving revenues, large pre-interest advertising expenditures can be seen as eroding a firm's ability to meet its debt service obligations. We find that although greater advertising by a firm improves liquidity of its bonds in the market, it does not lower the firm's cost of debt. However, firms with ineffective advertising experience reduced bond market liquidity and a higher cost of debt. Without a real positive economic impact, advertising has little or no value for bond investors.

Our paper examines whether holding multiple outside board seats compromises a director’s ability to effectively perform monitoring duties. Analyzing over 1400 firms, we report that individuals who hold more outside directorships serve on fewer board committees. The relation, however, appears non-linear, U-shaped, and in support for both the busyness and the reputation hypotheses. In addition, we find that holding more outside board seats decreases the likelihood of membership on compensation and audit committees. The findings substantiate evidence [Akhigbe, A., Martin, A.D., 2006. Valuation impact of Sarbanes–Oxley: Evidence from disclosure and governance within the financial services industry. Journal of Banking and Finance 30 (3), 989–1006] of value relevance of board committee structures. Additional analysis of committee memberships suggests that women and ethnic minorities are placed on more board committees. Also, directors on smaller and independent boards serve on more committees. Finally, it appears that the Sarbanes–Oxley act had a material impact on the association between the number of multiple board seats and committee memberships.