Does Board Overlap Promote Coordination Between Firms?

58 Pages Posted: 30 Nov 2021 Last revised: 6 Feb 2023

See all articles by Heng Geng

Heng Geng

Victoria University of Wellington

Harald Hau

University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute)

Roni Michaely

The University of Hong Kong; ECGI

Binh Nguyen

Victoria University of Wellington - Te Herenga Waka - Victoria University of Wellington, Students

Multiple version iconThere are 2 versions of this paper

Date Written: November 24, 2021

Abstract

We investigate how board overlap affects coordination and performance among public firms. Our identification exploits the staggered introduction of Corporate Opportunity Waivers (COWs) in nine U.S. states since 2000. By reducing legal risk to directors serving on multiple boards, the COW legislation increased intra-industry board overlap for research-intensive firms that benefit most from coordination. We find that intra-industry board overlap results in greater sales revenues, increased operating margins, and higher firm profitability. These outcomes are achieved through reduced investment and lower R&D expenditure, greater bilateral product differentiation, and more information sharing reflected in higher rates of patent cross-citation.

Keywords: Board overlap, corporate opportunity waivers, firm coordination

JEL Classification: G30, G38, K21, K22

Suggested Citation

Geng, Heng and Hau, Harald and Michaely, Roni and Nguyen, Binh, Does Board Overlap Promote Coordination Between Firms? (November 24, 2021). Swiss Finance Institute Research Paper No. 21-79, European Corporate Governance Institute – Finance Working Paper No. 803/2021, Available at SSRN: https://ssrn.com/abstract=3973387 or http://dx.doi.org/10.2139/ssrn.3973387

Heng Geng

Victoria University of Wellington ( email )

PO Box 600
Wellington, 6140
New Zealand

Harald Hau (Contact Author)

University of Geneva - Geneva Finance Research Institute (GFRI) ( email )

40 Boulevard du Pont d'Arve
Geneva 4, Geneva 1211
Switzerland

Swiss Finance Institute

Switzerland

Centre for Economic Policy Research (CEPR)

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Roni Michaely

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

ECGI ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Binh Nguyen

Victoria University of Wellington - Te Herenga Waka - Victoria University of Wellington, Students ( email )

New Zealand

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
457
Abstract Views
1,634
Rank
60,601
PlumX Metrics