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The Small World of Corporate Boards


  • Martin J. Conyon
  • Mark R. Muldoon


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. Copyright 2006 The Authors Journal compilation (c) 2006 Blackwell Publishing Ltd.

Suggested Citation

  • Martin J. Conyon & Mark R. Muldoon, 2006. "The Small World of Corporate Boards," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9-10), pages 1321-1343.
  • Handle: RePEc:bla:jbfnac:v:33:y:2006-11:i:9-10:p:1321-1343

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    References listed on IDEAS

    1. Steven R. Grenadier, 2003. "An Equilibrium Analysis of Real Estate," NBER Working Papers 9475, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2010. "Sell-Side School Ties," Journal of Finance, American Finance Association, vol. 65(4), pages 1409-1437, August.
    2. Lauren Cohen & Andrea Frazzini & Christopher Malloy, 2008. "The Small World of Investing: Board Connections and Mutual Fund Returns," Journal of Political Economy, University of Chicago Press, vol. 116(5), pages 951-979, October.
    3. Wesley Mendes-da-Silva, 2011. "Small Worlds and Board Interlocking in Brazil: A Longitudinal Study of Corporate Networks, 1997-2007," Brazilian Review of Finance, Brazilian Society of Finance, vol. 9(4), pages 465-492.
    4. Laurienti, Paul J. & Joyce, Karen E. & Telesford, Qawi K. & Burdette, Jonathan H. & Hayasaka, Satoru, 2011. "Universal fractal scaling of self-organized networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(20), pages 3608-3613.
    5. Stefania Vitali & Stefano Battiston, 2013. "The Community Structure of the Global Corporate Network," Papers 1301.2363,
    6. R. Andergassen, 2011. "Board of director collusion, managerial incentives and firm values," Working Papers wp795, Dipartimento Scienze Economiche, Universita' di Bologna.
    7. Tetsuji Okazaki & Michiru Sawada, 2012. "Interbank networks in prewar Japan: structure and implications," Industrial and Corporate Change, Oxford University Press, vol. 21(2), pages 463-506, April.
    8. repec:spr:scient:v:82:y:2010:i:1:d:10.1007_s11192-009-0032-z is not listed on IDEAS
    9. ØYvind Bøhren & R. Øystein Strøm, 2010. "Governance and Politics: Regulating Independence and Diversity in the Board Room," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 37(9-10), pages 1281-1308, November/.
    10. E. Algaba & J. Bilbao & R. Brink, 2015. "Harsanyi power solutions for games on union stable systems," Annals of Operations Research, Springer, vol. 225(1), pages 27-44, February.
    11. Kirchmaier, Thomas & Stathopoulos, Konstantinos, 2008. "From fiction to fact: the impact of CEO social networks," LSE Research Online Documents on Economics 24427, London School of Economics and Political Science, LSE Library.
    12. Leonardo Bargigli & Renato Giannetti, 2015. "The Italian Corporate System: SOEs, Private Firms and Institutions in a Network Perspective (1952-1983)," Working Papers - Economics wp2015_01.rdf, Universita' degli Studi di Firenze, Dipartimento di Scienze per l'Economia e l'Impresa.
    13. Malika Hamadi & Andreas Heinen & Nicolas Jonard & Alfonso Valdesogo, 2015. "Desperately Seeking Small Worlds in Corporate Boards:International Evidence from Listed Firms," CREA Discussion Paper Series 15-19, Center for Research in Economic Analysis, University of Luxembourg.
    14. Lucia Bellenzier & Rosanna Grassi, 2014. "Interlocking directorates in Italy: persistent links in network dynamics," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 9(2), pages 183-202, October.
    15. Sheen S. Levine & Robert Kurzban, 2006. "Explaining clustering in social networks: towards an evolutionary theory of cascading benefits," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 27(2-3), pages 173-187.
    16. Sankowska, Anna & Siudak, Dariusz, 2016. "The small world phenomenon and assortative mixing in Polish corporate board and director networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 443(C), pages 309-315.
    17. Huang, Chung-Yuan & Tsai, Yu-Shiuan, 2010. "Effects of friend-making resources/costs and remembering on acquaintance networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(3), pages 604-622.
    18. repec:spr:jeicoo:v:12:y:2017:i:2:d:10.1007_s11403-015-0165-5 is not listed on IDEAS
    19. Matthias Raddant & Mishael Milaković & Laura Birg, 2017. "Persistence in corporate networks," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(2), pages 249-276, July.

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