Director Networks, Mobility, and Governance: Evidence from Corporate Bankruptcies

51 Pages Posted: 17 Aug 2017 Last revised: 8 Dec 2018

See all articles by Shenje Hshieh

Shenje Hshieh

City University of Hong Kong

Nimesh Patel

University of Hawai'i at Manoa, Shidler College of Business

Jiasun Li

George Mason University - Department of Finance

Date Written: March 9, 2018

Abstract

We exploit a quasi-natural experiment to identify the importance of professional connections in determining a firm's board composition. At the individual level, directors who share work experiences with the executives/directors of bankrupt firms experience on average a 6-percentage-point decline in their likelihood of finding new board positions within a year of bankruptcy filing, even though they have not held positions at any bankrupt firms themselves. At the firm level, bankruptcy-induced network shocks not only reduce interlocking directorates across different industries, but also change board composition: the number of independent directors and new directors on the board decreases while director tenure increases. Firms with less mobile directors, however, show improvements in shareholder rights and monitoring.

Keywords: Social networks, labor mobility, corporate governance, bankruptcy

JEL Classification: G30, G33, M12

Suggested Citation

Hshieh, Shenje and Patel, Nimesh and Li, Jiasun, Director Networks, Mobility, and Governance: Evidence from Corporate Bankruptcies (March 9, 2018). Available at SSRN: https://ssrn.com/abstract=3019113 or http://dx.doi.org/10.2139/ssrn.3019113

Shenje Hshieh (Contact Author)

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Nimesh Patel

University of Hawai'i at Manoa, Shidler College of Business ( email )

Honolulu, HI 96815
United States

Jiasun Li

George Mason University - Department of Finance ( email )

Fairfax, VA 22030
United States

HOME PAGE: http://sites.google.com/site/jiasunlihome/

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