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; University of California, Los Angeles (UCLA), Students

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

University of California, Los Angeles (UCLA), Students ( email )

Los Angeles, CA
United States

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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