Boardroom Network and Corporate Performance: When Who You Know Contributes to What You Know

58 Pages Posted: 2 Aug 2021 Last revised: 13 Jan 2023

Date Written: January 13, 2023


This paper examines a difficult-to-measure and unobservable concept of information-sharing between directors. I measure the prominence of the board’s information-sharing in the boardroom network with boardroom centrality and study its role in the firm’s performance. Using an instrumental variable approach based on director deaths at distant firms in the boardroom network, I isolate the effect of boardroom centrality on firm performance from the confounding factors and find that boardroom centrality deteriorates firm performance on average, relative to the less central network firms. This deterioration is particularly strong for firms with R&D expenditures, intangible assets, advertising activity, and firms closely connected through the network to peers with similar products. Concurrently, firms with no advertising activity and those located remotely from peers with similar products in the network benefit from boardroom centrality. Therefore, the trade-off between the benefits of information collection from the boardroom network and the costs stemming from the dissemination of sensitive information to the rest of the network leads to a negative effect of boardroom centrality when the receivers of this information can quickly benefit from it (e.g., firms with similar products) and when firms have large amounts of proprietary information. Moreover, competition strengthens the negative impact of boardroom centrality on firm performance because the timely adoption of effective policies is highly important in competitive industries. This paper adds to the literature on directors’ value, suggesting that the role of boardroom centrality is nuanced, and provides a research design that can isolate the centrality effects in various other applications.

Keywords: boardroom network, performance, network centrality, information diffusion, proprietary costs, product similarity, competition

JEL Classification: G34, L14, L25

Suggested Citation

Abramova, Inna, Boardroom Network and Corporate Performance: When Who You Know Contributes to What You Know (January 13, 2023). Available at SSRN: or

Inna Abramova (Contact Author)

London Business School

Regent's Park
London, NW1 4SA
United Kingdom

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