What's in a Name? The Valuation Effect of Directors' Sharing of Surnames

57 Pages Posted: 1 Apr 2017 Last revised: 12 Jul 2018

See all articles by Tan Youchao

Tan Youchao

Southwestern University of Finance and Economics (SWUFE)

Jason Zezhong Xiao

Cardiff Business School, Cardiff University

Cheng Zeng

University of Manchester

Hong Zou

The University of Hong Kong - Faculty of Business and Economics

Date Written: June 28, 2018

Abstract

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

Youchao, Tan and Xiao, Jason Zezhong and Zeng, Cheng and Zou, Hong, What's in a Name? The Valuation Effect of Directors' Sharing of Surnames (June 28, 2018). Available at SSRN: https://ssrn.com/abstract=2943154 or http://dx.doi.org/10.2139/ssrn.2943154

Tan Youchao

Southwestern University of Finance and Economics (SWUFE) ( email )

55 Guanghuacun St,
Chengdu, Sichuan 610074
China

Jason Zezhong Xiao

Cardiff Business School, Cardiff University ( email )

Aberconway building
Colum Drive
Cardiff, CF10 3EU
United Kingdom

Cheng Zeng

University of Manchester ( email )

Oxford Road
Manchester, M13 9SS
United Kingdom

Hong Zou (Contact Author)

The University of Hong Kong - Faculty of Business and Economics ( email )

Hong Kong

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