This article investigates the simultaneous participation of directors in 320 Brazilian-listed companies in 2001Brazilian-listed companies in , 2003Brazilian-listed companies in , and 2005. Our results show that interlocking directorates are a common practice in Brazil. Firm value is, on average, negatively impacted by interlocking directorships, especially in firms in which a majority of directors hold three or more board positions. We also find evidence of a nonlinear relationship between interlocking and return on assets, consistent with the hypothesis that low and moderate levels of this practice may be beneficial to a company, while a high degree of interconnectedness among directors is likely to hurt performance. RESUMEN.Este artículo investiga cómo, en 2001, 2003, y 2005, 320 directores brasileños participaron simultáneamente en múlti-ples juntas directivas entrelazadas (board interlocking) de empresas cotizadas en la bolsa. Los resultados obtenidos demuestran que es una práctica común encontrar juntas directivas entrelazadas en Brasil. En general, el valor de la empresa se ve afectado negativamente por el sistema de las juntas directivas entrelazadas, particularmente en el caso de empresas cuyos vocales ocupan, en su mayoría, tres o más cargos en otras juntas. También identificamos una relación no linear entre las juntas directivas entrelazadas y el retorno sobre el activo de las empresas, coherente con la hipótesis que sostiene que esta práctica, cuando aplicada poco o moderadamente puede ser ventajosa para la empresa, mientras que un alto 2 R. L. Santos et al. grado de entrelazamiento entre los directores es bien probable que perjudique su desempeño operacional. RESUMO. Este artigo investiga a participação simultânea em múltiplos conselhos de uma amostra de 320 conselheiros de companhias brasileiras listadas em Bolsa durante 2001, 2003, e 2005. Os resultados mostram que a interligação de conselhos (board interlocking) é uma prática comum no Brasil. O valor da firma é, em média, negativamente impactado pelo board interlocking, especialmente no caso de empresas cuja maioria dos conselheiros ocupa três ou mais cargos em outros conselhos. Identificou-se também uma relação não-linear entre o interlocking e o retorno sobre ativo das companhias, o que está em linha com a hipótese de que um nível moderado de interligações pode ser benéfico à empresa, enquanto que um elevado grau de interlocking pode prejudicar seu desempenho operacional.

This paper investigates the simultaneous participation of directors in different companies from 320 Brazilian listed firms in 2003 and 2005. We identify which firms are connected through a network of directors, which corporate characteristics contribute to this phenomenon, and if board interlocking influences firm value and operational performance. The results show that interlocking directorates are a common practice in Brazil. Besides, larger boards, more dispersed ownership structures, and larger firm size are factors associated with a high level of board interlocking. Moreover, we find that firm value is, on average, negatively impacted by higher levels of board interlocking, especially on firms with board of directors considered too busy (those in which a majority of directors hold three or more directorships) or on firms where their CEO hold directorships in other companies. Besides being a pioneer work on this field in Latin America, the paper provides subsides for the preparation of good corporate governance practices from regulators regarding the effectiveness of multiple directorships and its consequences for corporate value.

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We analyze the simultaneous participation of directors in multiple companies and its effects on boards’ roles and activities. By sitting in multiple boards, directors may face time scarcity and they may be too busy to adequately perform their tasks. Using survey questionnaires about board’s activities, which were directly sent to firms and their directors, this paper founds that busy boards are considered to be less active, less independent and less relevant to firms. Additionally, these boards are less committed to their responsibilities, such as hiring/firing the CEO and evaluating executives’ performance. They also do not monitor the firm’s risk properly. Our results present an insider perception of the board’s roles and activities, which can be useful for market regulators and policy-makers.

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