The Small World of Corporate Boards

23 Pages Posted: 7 Dec 2006

See all articles by Martin J. Conyon

Martin J. Conyon

Bentley University; Wharton School, Center for Human Resources

Mark R. Muldoon

University of Manchester - Department of Mathematics

Abstract

We demonstrate the importance of graph theory for understanding boards of directors. Specifically, we focus on the "small world" phenomenon. Our empirical results show that a random graph model is remarkably good at explaining board structure and connectedness in the United States, the United Kingdom and Germany. Although there are small-world traits such as "clustering" and "short-paths" in the corporate world, they are no more pronounced than would be expected by chance in a statistically similar, but randomly assembled corporate universe. In short, boards of directors, especially in the United States, are no more "clubby" than expected. Finally, our results show the existence of positive degree correlation: directors who sit on many boards do so in the company of other directors who sit on many boards. Board members whose services are in high demand, serve on boards with similar directors.

Suggested Citation

Conyon, Martin J. and Muldoon, Mark R., The Small World of Corporate Boards. Journal of Business Finance & Accounting, Vol. 33, Nos. 9-10, pp. 1321-1343, November/December 2006, Available at SSRN: https://ssrn.com/abstract=950048 or http://dx.doi.org/10.1111/j.1468-5957.2006.00634.x

Martin J. Conyon (Contact Author)

Bentley University ( email )

175 Forest Street
Waltham, MA 02145
United States

Wharton School, Center for Human Resources ( email )

3600 Locust Walk
Philadelphia, PA 19104-6365
United States

Mark R. Muldoon

University of Manchester - Department of Mathematics ( email )

Oxford Road
Manchester M13 9PL, M13 9PL
United Kingdom

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