Board interlocks and capital structure dynamics: evidence from China

Li, Danmeng; Jiang, Qinghua; Mai, Yong

doi:10.1111/acfi.12531

Cited by 20 publications

(10 citation statements)

References 60 publications

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“…The results obtained are diverse, but in general positive as regards the relation between financial performance and participation in a business network (Cárdenas, 2014). These studies are mostly based on the resource dependence theory, demonstrating that personal links between a director and other members of company boards represent a preferential channel to access resources, information and legitimacy, with positive effects on firm profitability (Hillman et al ., 2009; Li et al ., 2019). Behind this theory is the assumption that the directors who participate in the interlocks are chosen to maximise the value of the firms, in favour of the interests of the stakeholders (Caiazza et al ., 2023).…”

Section: Theory Development and Study Hypothesesmentioning

confidence: 99%

Interlocking directorates and family firm performance: an emerging market’s perspective

Watkins-Fassler

Ariza

Fernández‐Pérez

et al. 2023

JFBM

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PurposeThis study analyses interlocking directorates from the perspective of an emerging market, Mexico, where formal institutions are weak, and family firms with high ownership concentration dominate. It responds to recent calls in the literature on interlocks, which urge the differentiation between family and non-family businesses and to complete more research on emerging economies.Design/methodology/approachA database was constructed for 89 non-financial companies (52 family-owned) listed on the Mexican Stock Exchange (BMV) from 2001 to 2014. This period includes normal times and an episode of financial crisis (2009–2010). To test the hypotheses, a dynamic panel model (in two stages) is used, applying GMM.FindingsIn normal times, the advantages of Board Chairman (COB) interlocks for the performance of publicly traded Mexican family firms are obtained regardless of the weak formal institutional environment. By contrast, during financial crisis, interlocking family COBs are more likely to jointly expropriate minority shareholders with actions that further their family objectives, which mitigates the positive effect of interlocks on performance. These findings contrast with the insignificant effects of COB interlocks found for non-family corporates.Originality/valueA new framework is proposed which, through agency theory, finds points of concordance among resource dependence and class hegemony theories, to understand the effect of interlocking directorates on the performance of family firms operating in Mexico. The results of the empirical exercise for family companies listed on BMV during normal and financial crisis periods suggest its applicability.

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Section: Theory Development and Study Hypothesesmentioning

confidence: 99%

Interlocking directorates and family firm performance: an emerging market’s perspective

Watkins-Fassler

Ariza

Fernández‐Pérez

et al. 2023

JFBM

View full text Add to dashboard Cite

show abstract

“…Well-connected independent directors accessed additional information and resources by serving on multiple company boards, which not only helped to reduce the likelihood of misstatements in financial reporting ( Omer et al, 2020 ) but also helped to improve management’s earnings forecasting accuracy ( Schabus, 2022 ). In addition, Li et al (2019) , Field et al (2013) and Feng et al (2019) have shown that independent directors located at the central location of the director networks played an important role in enhancing the efficiency of financing and improving IPO valuation.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

How does independent director affect tunneling?—Evidence from social networks

2022

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Given the influence of controlling shareholders on the company, it is important to analyze how independent directors can protect minority shareholders’ interests using the information and resources obtained from social networks. This paper studies the impact of director networks on controlling shareholders’ tunneling behavior in China over the period 2002–2020. Using social network analysis, this paper finds that controlling shareholders’ appropriation to minority shareholders is mitigated in companies with well-connected independent directors. These results remain consistent after a series of robustness and endogeneity tests. This study also reveals that internal controls play a mediating role between director networks and tunneling behavior. In addition, the study indicates that the restraining effect of director networks on controlling shareholders’ tunneling behavior is more pronounced in companies with weaker audit monitoring and poorer transparency. In conclusion, the results reveal that well-connected independent directors play an important role in protecting minority shareholders’ interests.

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“…The lag is used, as it takes time for a firm Market ranking and network structure to reap the benefits from an interlock tie (Larcker et al, 2013), where beneficial knowledge exchange is unlikely to be instantaneous. Additionally, the use of lagged variables also aids in alleviating potential endogeneity effects (Li et al, 2019). Therefore, in this case the TNAM is defined as follows:…”

Section: Tnam Formulationmentioning

confidence: 99%

Market ranking and network structure: pathway to dominance

Sarabi

Smith

McGregor

et al. 2021

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PurposeThe relationship between interlocking directorates and firm performance has been increasingly debated, with a focus on whether firm's centrality in interlock networks is associated with performance. The purpose of this study is to examine not only how a firm's position in this network is associated with performance but also how the performance of network partners can impact a firm's performance. This study examines how firms effectively utilise the interlock network to achieve the goal of higher market capitalisation – termed market capitalisation rank (MCR).Design/methodology/approachThe premise of the study is the UK FTSE 350 firms from 2014 to 2018. The paper makes use of a temporal network autocorrelation model to examine how firm characteristics, the structural position in the interlock network and the performance of network partners affect MCR over time.FindingsThe analysis indicates that firms with ties (via the interlock network) to firms with high market capitalisation are more likely to enhance their own MCR, highlighting network partners have the opportunity to play a critical role in a firm's dominance strategy to optimise firm value.Originality/valueThe value of this research is that it does not only look at the impact of a firm's position in the network on performance, but the impact of the performance of network partners on a firm's market performance as well.

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Board interlocks and capital structure dynamics: evidence from China

Cited by 20 publications

References 60 publications

Interlocking directorates and family firm performance: an emerging market’s perspective

Interlocking directorates and family firm performance: an emerging market’s perspective

How does independent director affect tunneling?—Evidence from social networks

Market ranking and network structure: pathway to dominance

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