Director Networks and Firm Value

58 Pages Posted: 6 Apr 2020 Last revised: 12 Jun 2021

See all articles by Tor-Erik Bakke

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance

Jeff Black

University of Memphis

Hamed Mahmudi

University of Delaware - Department of Finance

Scott C. Linn

University of Oklahoma - Michael F. Price College of Business

Date Written: December 7, 2020

Abstract

Are the professional networks of directors valuable? To separate the effect of director networks on firm value from the effect of other value-relevant director attributes, we use the unexpected deaths of directors as a shock to the director networks of interlocked directors. By studying the announcement returns and using a difference-in-differences methodology, we find the negative shock to director networks reduces the value of interlocked firms – a result that is stronger for firms that are more likely to benefit from access to information from board connections. This evidence is consistent with director networks being valuable and improving access to information.

Keywords: Board of Directors, Network Centrality, Quasi-natural Experiment, Firm Value

JEL Classification: G3, G32, D85, L14

Suggested Citation

Bakke, Tor-Erik and Black, Jeffrey R. and Mahmudi, Hamed and Linn, Scott C., Director Networks and Firm Value (December 7, 2020). Available at SSRN: https://ssrn.com/abstract=3552936 or http://dx.doi.org/10.2139/ssrn.3552936

Tor-Erik Bakke

University of Illinois at Chicago - Department of Finance ( email )

2431 University Hall (UH)
601 S. Morgan Street
Chicago, IL 60607-7124
United States
6087707753 (Phone)

HOME PAGE: http://https://sites.google.com/site/tebakke/

Jeffrey R. Black

University of Memphis ( email )

United States

Hamed Mahmudi (Contact Author)

University of Delaware - Department of Finance ( email )

Alfred Lerner College of Business and Economics
Newark, DE 19716
United States

Scott C. Linn

University of Oklahoma - Michael F. Price College of Business ( email )

307 West Brooks
Norman, OK 73019-4004
United States
405-325-3444 (Phone)
405-325-1957 (Fax)

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