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Interlocking Boards and Firm Performance: Evidence from a New Panel Database


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  • Mari�lle C. Non

    (Erasmus Universiteit Rotterdam)

  • Philip Hans Franses

    (Erasmus Universiteit Rotterdam)


An interlock between two firms occurs if the firms share one or more directors in their boards of directors. We explore the effect of interlocks on firm performance for 101 large Dutch firms using a large and new panel database. We use five different performance measures, and for each performance measure we design three different panel data models, where we allow the effect of the number of interlocks to be linear, quadratic or square root, either with or without lags. Based on all results we conclude that current interlocks can have a negative effect on future firm performance. We show that this negative effect is jointly established by (1) interlocking directors being too busy and (2) by directors being members of a homogenous upper class group.

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 07-034/2.

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Date of creation: 30 Mar 2007
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Handle: RePEc:dgr:uvatin:20070034

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Keywords: interlocks; firm performance;

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  1. Stephen P. Ferris & Murali Jagannathan & A. C. Pritchard, 2003. "Too Busy to Mind the Business? Monitoring by Directors with Multiple Board Appointments," Journal of Finance, American Finance Association, American Finance Association, vol. 58(3), pages 1087-1112, 06.
  2. Hans van Ees & Theo J.B.M. Postma & Elmer Sterken, 2003. "Board Characteristics and Corporate Performance in the Netherlands," Eastern Economic Journal, Eastern Economic Association, vol. 29(1), pages 41-58, Winter.
  3. Eliezer M. Fich & Anil Shivdasani, 2006. "Are Busy Boards Effective Monitors?," Journal of Finance, American Finance Association, American Finance Association, vol. 61(2), pages 689-724, 04.
  4. Dooley, Peter C, 1969. "The Interlocking Directorate," American Economic Review, American Economic Association, American Economic Association, vol. 59(3), pages 314-23, June.
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Cited by:
  1. Battistin, Erich & Graziano, Clara & Parigi, Bruno M., 2012. "Connections and performance in bankers’ turnover," European Economic Review, Elsevier, Elsevier, vol. 56(3), pages 470-487.


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