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Director Networks, Firm Performance, and Shareholder Base

37 Pages Posted: 12 Oct 2010  

Dominik Böhler

Karlsruhe Institute of Technology

Marc Steffen Rapp

University of Marburg - School of Business & Economics; Marburg Centre for Institutional Economics (MACIE); Center for Corporate Governance, Copenhagen Business School

Michael Wolff

University of Göttingen

Date Written: October 10, 2010

Abstract

Although often criticized for their inefficiency, director networks are observed in many economies of the world. This raises two questions: What is the empirical effect of director networks on firm performance and what are the determinants of director networks? We empirically examine both issues drawing on a unique dataset covering German firms from 1999 to 2007. We find that network embeddedness negatively affects firm performance. Moreover, while foreign investors actively disentangle the network, German institutional investors foster it. Our findings are consistent with the social class hypothesis arguing that well-connected directors feel more committed to their network than to the firms in which they sit on the board. Our findings have important implications for corporate governance research and the regulation of capital markets.

Keywords: director networks, investor base, corporate governance, inter-organizational relationships

JEL Classification: G34, G15, F40, M16

Suggested Citation

Böhler, Dominik and Rapp, Marc Steffen and Wolff, Michael, Director Networks, Firm Performance, and Shareholder Base (October 10, 2010). Available at SSRN: https://ssrn.com/abstract=1691241 or http://dx.doi.org/10.2139/ssrn.1691241

Dominik Böhler

Karlsruhe Institute of Technology ( email )

Kaiserstraße 12
Karlsruhe, Baden Württemberg 76131
Germany

Marc Steffen Rapp (Contact Author)

University of Marburg - School of Business & Economics ( email )

Am Plan 2
Marburg, D-35037
Germany

Marburg Centre for Institutional Economics (MACIE) ( email )

Am Plan
Marburg, 35032
Germany

Center for Corporate Governance, Copenhagen Business School ( email )

Porcelænshaven 24A, 3rd floor
Copenhagen
Denmark

Michael Wolff

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

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