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Board interlocking in Brazil: Director participation in multiple companies and its effect on the value of firms

Author

Listed:
  • Rafael Liza Santos

    (FEA/USP)

  • Alexandre Di Miceli da Silveira

    (FEA/USP)

Abstract

This paper investigates the simultaneous participation of directors in different companies from 320 Brazilian listed firms in 2003 and 2005. We identify which firms are connected through a network of directors, which corporate characteristics contribute to this phenomenon, and if board interlocking influences firm value and operational performance. The results show that interlocking directorates are a common practice in Brazil. Besides, larger boards, more dispersed ownership structures, and larger firm size are factors associated with a high level of board interlocking. Moreover, we find that firm value is, on average, negatively impacted by higher levels of board interlocking, especially on firms with board of directors considered too busy (those in which a majority of directors hold three or more directorships) or on firms where their CEO hold directorships in other companies. Besides being a pioneer work on this field in Latin America, the paper provides subsides for the preparation of good corporate governance practices from regulators regarding the effectiveness of multiple directorships and its consequences for corporate value.

Suggested Citation

  • Rafael Liza Santos & Alexandre Di Miceli da Silveira, 2007. "Board interlocking in Brazil: Director participation in multiple companies and its effect on the value of firms," Brazilian Review of Finance, Brazilian Society of Finance, vol. 5(2), pages 125-163.
    • Handle: RePEc:brf:journl:v:5:y:2007:i:2:p:125-163
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    Citations

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    Cited by:

    1. Milene B Alves & Ricardo P C Leal, 2016. "Board characteristics and compensation in Brazilian listed companies," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 13(4), pages 309-328, November.
    2. repec:hal:spmain:info:hdl:2441/6og253jg8f83ibg0ibvjutseue is not listed on IDEAS
    3. Corentin Trevien, 2016. "Four Essays in Empirical Urban: Economics Evaluation of French Regional Policies," Sciences Po publications info:hdl:2441/6og253jg8f8, Sciences Po.

    More about this item

    Keywords

    Corporate Governance; Corporate Finance;

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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