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Boardroom centrality and firm performance

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  • Larcker, David F.
  • So, Eric C.
  • Wang, Charles C.Y.
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    Abstract

    Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast errors. Return prediction, return-on-assets growth, and analyst errors are concentrated among high growth opportunity firms or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms standing to benefit most from information and resources exchanged through boardroom networks. Overall, our results suggest that director networks provide economic benefits that are not immediately reflected in stock prices.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Accounting and Economics.

    Volume (Year): 55 (2013)
    Issue (Month): 2 ()
    Pages: 225-250

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    Handle: RePEc:eee:jaecon:v:55:y:2013:i:2:p:225-250

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    Web page: http://www.elsevier.com/locate/jae

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    Keywords: Board of director networks; Analyst forecasts; Market efficiency;

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    Cited by:
    1. Renneboog, L.D.R. & Zhao, Y., 2013. "Director Networks and Takeovers," Discussion Paper 2013-056, Tilburg University, Center for Economic Research.

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