What's in a Name? The Valuation Effect of Directors' Sharing of Surnames
57 Pages Posted: 1 Apr 2017 Last revised: 12 Jul 2018
Date Written: June 28, 2018
Using surname sharing as a novel measure of social ties, we examine the effect of directors’ surname sharing on firm value. We find that boards with greater surname homogeneity are associated with lower firm value, particularly when directors share rare surnames and when firms operate in regions with stronger clan systems. The finding is not driven by familial ties. The market reacts positively to plausibly exogenous director resignations that reduce director surname sharing. Director surname sharing lowers firm value by reducing director dissent, granting excess executive compensation, increasing unfair related-party transactions, and discouraging innovation.
Keywords: Surname, Social Tie, Board Diversity, Firm Value, Board Voting, Executive Compensation
JEL Classification: G02, G32, M14
Suggested Citation: Suggested Citation