The Complexity of Social Capital: The Influence of Board and Ownership Interlocks on Implied Cost of Capital in an Emerging Market

Abstract

Starting from sociological perspectives on complexity, we show how the social capital of boards and owners networks affects the implied cost of capital of companies listed on Brazilian stock exchange. We specifically show arguments and evidence that the effect of the relational resources found in the direct, indirect, and heterogeneous board's ties reduces the cost of capital while relational resources embedded in shareholder networks increase the cost of capital. Our results show that while the increase in the relational resources of the board reduces the implied cost of capital, an increase in these shared resources in the ownership relationships of the firm increases the cost of financial capital.

New Insights into Non-Listed Family SMEs in Spain: Board Social Capital, Board Effectiveness, and Sustainable Performance

“…Prior research has suggested that board interlocks are a critical type of social capital [23,57,58]. When directors sit on two or more company boards, they create links known as board interlocks [59][60][61].…”

“…When directors sit on two or more company boards, they create links known as board interlocks [59][60][61]. Through interlocks and experiences with other boards, directors provide a conduit for social influences that create an informational context for board decisions [57,62]. Based on RDT, we maintain that a board's interlocks provide access to tacit and hard-to-imitate resources [63], expertise, advice, and counsel to firms [42,64].…”

“…Several studies noticed that board interlocks have a substantial effect on governance issues [57,62], since they also permit access to a wider world [73]. Board members' decisions to sit on other corporate boards increase the value of directors' home firms [74], leading to an impact on sustainable performance [55,75].…”

Board social capital and structure, ownership and financial variables of Brazilian companies: A three levels dataset integrating directors, board networks and firm characteristics

“…This indicator ranges from 0 to 1, where the coefficient “0” indicates fully ungrouped networks while the coefficient “1” indicates fully clustered networks. This measure will be calculated for each year of the company's participation in the stock exchange.6016EfficiencyPercentageBurt's measure of the effective size of the ego's network (essentially, the number of alters minus the average degree of alters within the ego network, not counting ties to ego).Considering that an actor i can present n contacts, we must:Efficiency = [EffSize/n] = [(Dalters - n)/n] = {[(2 l/n) - n]/n}On what:• Efficiency = Proportion of non-redundant loops;• Dalters = Redundant contacts;• n = alters;• l = Number of ties between n (alters).6016Social_Capital (Thousands_of_Reais)ContinuousResources immersed in the network of social relations between Boards of Directors through the so-called board's interlocks, accessed or/and mobilized in intentional actions through the interaction of the network and the resources present in it [4]. Social capital is constituted by the set of relations that give an individual access to resources that do not necessarily belong to him and that he would not have access were it not for their relationships.…”

A Motif-Based Analysis to Reveal Local Implied Information in Cross-Shareholding Networks

“…To explore the interactive behaviors among economic agents, many economic systems have been modeled and better understand as complex networks [1][2][3][4][5], particularly crossshareholding networks (CSNs), which are specific architectures that can reflect the risk-resistant capability of corporate and capital markets [6,7]. With the increasing complexity of business motivations (such as capital financing, spread risk, and industrial alliances), the structure of CSNs is becoming much more intricate and exposes various important local patterns with different economic functions.…”