When Elites Forget Their Duties: The Double‐Edged Sword of Prestigious Directors on Boards

29 Pages Posted: 6 Oct 2017

See all articles by Jana Oehmichen

Jana Oehmichen

University of Goettingen (Gottingen)

Daniela Braun

Ludwig Maximilian University of Munich (LMU)

Michael Wolff

University of Göttingen

Toru Yoshikawa

Singapore Management University - Lee Kong Chian School of Business

Date Written: November 2017

Abstract

Previous research indicates that the performance effect of prestigious directors is ambiguous. Our study addresses this issue by integrating the theoretical lens of board capital and the institutional perspective. We argue that prestigious directors can bring benefits as well as costs. We claim that the emergence of these costs depends on the institutional context, specifically the institutional characteristics of the country's corporate elite circle which is characterized by the elite cohesion and the elite exclusiveness. Our empirical results with a 15‐country sample covering the period of 2005 to 2014 provide evidence for the overall existence of a positive performance effect of prestigious boards. However, our results also indicate that these beneficial effects of prestigious boards are mitigated in countries with high elite exclusiveness. Hence, under these certain institutional conditions, the elite‐favouring behaviour of prestigious directors also brings costs.

Keywords: corporate elite, corporate governance, director network, institutions, prestigious directors

Suggested Citation

Oehmichen, Jana and Braun, Daniela and Wolff, Michael and Yoshikawa, Toru, When Elites Forget Their Duties: The Double‐Edged Sword of Prestigious Directors on Boards (November 2017). Journal of Management Studies, Vol. 54, Issue 7, pp. 1050-1078, 2017, Available at SSRN: https://ssrn.com/abstract=3048581 or http://dx.doi.org/10.1111/joms.12275

Jana Oehmichen (Contact Author)

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Daniela Braun

Ludwig Maximilian University of Munich (LMU) ( email )

Geschwister-Scholl-Platz 1
Munich, DE Bavaria 80539
Germany

Michael Wolff

University of Göttingen ( email )

Platz der Göttinger Sieben 3
Göttingen, DE 37073
Germany

HOME PAGE: http://www.contolling.uni-goettingen.de

Toru Yoshikawa

Singapore Management University - Lee Kong Chian School of Business ( email )

469 Bukit Timah Road
Singapore 912409
Singapore

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