Board Interlocking in Brazil: Directors' Participation in Multiple Companies and its Effect on Firm Value

37 Pages Posted: 3 Oct 2007 Last revised: 20 Jul 2009

See all articles by Rafael Liza Santos

Rafael Liza Santos

University of São Paulo (FEA-USP) - School of Economics, Management and Accounting

Alexandre Di Miceli da Silveira

Alvares Penteado School of Business (Fecap)

Lucas Ayres B. de C. Barros

University of Sao Paulo

Date Written: January 15, 2009

Abstract

This paper investigates the simultaneous participation of directors in different companies from a sample of 320 Brazilian listed firms in 2001, 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 profitability. Our results show that interlocking directorates is a common practice in Brazil among listed firms. Besides, larger boards, more dispersed ownership structures, and larger firm size are associated with higher levels of board interlocking. We also find that firm value is, on average, negatively impacted by interlocking, especially in firms with a “busy board” (when a majority of directors hold three or more directorships) or in firms where the CEO holds directorships in other companies. Overall, this paper provides support for the elaboration of governance guidelines by regulators regarding the consequences of interlocked directorates for corporate value.

Keywords: Board Interlocking, Board of Directors, Corporate Governance, Directors, Firm Value.

JEL Classification: G32, G34

Suggested Citation

Santos, Rafael Liza and Di Miceli da Silveira, Alexandre and Barros, Lucas Ayres Barreira de Campos, Board Interlocking in Brazil: Directors' Participation in Multiple Companies and its Effect on Firm Value (January 15, 2009). Available at SSRN: https://ssrn.com/abstract=1018796 or http://dx.doi.org/10.2139/ssrn.1018796

Rafael Liza Santos

University of São Paulo (FEA-USP) - School of Economics, Management and Accounting ( email )

Av. Prof. Luciano Gualberto 908
São Paulo SP, São Paulo 05508-900
Brazil

Alexandre Di Miceli da Silveira (Contact Author)

Alvares Penteado School of Business (Fecap) ( email )

Av. Liberdade, 532
Liberdade
São Paulo
Brazil
+5511945909031 (Phone)

HOME PAGE: http://lattes.cnpq.br/4773608871754250

Lucas Ayres Barreira de Campos Barros

University of Sao Paulo ( email )

Avenida Professor Luciano Gualberto, 908
São Paulo, São Paulo 05508-010
Brazil

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
774
Abstract Views
3,966
Rank
59,494
PlumX Metrics