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Boardroom Centrality and Firm PerformanceDavid F. LarckerStanford University - Graduate School of Business Eric C. SoMassachusetts Institute of Technology (MIT) - Sloan School of Management Charles C. Y. WangHarvard Business School January 13, 2013 Journal of Accounting & Economics (JAE), Forthcoming Rock Center for Corporate Governance at Stanford University Working Paper No. 84 Abstract: Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast errors. Return prediction, return-on-assets growth, and analyst errors are concentrated among high growth opportunity firms or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms standing to benefit most from information and resources exchanged through boardroom networks. Overall, our results suggest that director networks provide economic benefits that are not immediately reflected in stock prices.
Keywords: board of director networks, analyst forecasts, market efficiency JEL Classification: G3, G14, L14 Accepted Paper SeriesDate posted: July 31, 2010 ; Last revised: February 4, 2013Suggested CitationContact Information
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