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.
Do Interlocks Lead to the Convergence of Interfirm Innovation Performance? Evidence From China
