Director Networks, Turnover, and Appointments

44 Pages Posted: 3 Oct 2017 Last revised: 24 Apr 2018

See all articles by Luc Renneboog

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Yang Zhao

Newcastle University

Date Written: April 2018

Abstract

This paper analyzes the labor market (turnover and appointments) of executive and non-executive directors by means of social network methodology. We find that directors with strong networks are able to obtain labor market information that enables them to leave their firm more easily for better opportunities. Networks also mitigate information asymmetry problems of external director appointments. Furthermore, the strong impact of indirect connections is in line with the ‘strength of the weak ties’ theory. The fact that direct connections are less important signifies that the connections to people that are close and local are likely to convey redundant information, whereas connections to distant individuals are more efficient in terms of information acquisition and labor market performance improvement.

Keywords: Corporate Governance, Director Networks, Director Turnover, Director Appointments

JEL Classification: G34, J4, L14

Suggested Citation

Renneboog, Luc and Zhao, Yang, Director Networks, Turnover, and Appointments (April 2018). European Corporate Governance Institute (ECGI) - Finance Working Paper No. 534/2017. Available at SSRN: https://ssrn.com/abstract=3045221 or http://dx.doi.org/10.2139/ssrn.3045221

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Yang Zhao

Newcastle University ( email )

5 Barrack Road
Devonshire Building
NEWCASTLE UPON TYNE, NE1 7RU
United Kingdom

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