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Decision making dynamics in corporate boards

Author

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  • Battiston, Stefano
  • Bonabeau, Eric
  • Weisbuch, Gérard

Abstract

Members of boards of directors of large corporations who also serve together on an outside board, form the so-called interlock graph of the board and are assumed to have a strong influence on each others’ opinion. We here study how the size and the topology of the interlock graph affect the probability that the board approves a strategy proposed by the Chief Executive Officer. We propose a measure of the impact of the interlock on the decision making, which is found to be a good predictor of the decision dynamics outcome. We present two models of decision making dynamics, and we apply them to the data of the boards of the largest US corporations in 1999.

Suggested Citation

  • Battiston, Stefano & Bonabeau, Eric & Weisbuch, Gérard, 2003. "Decision making dynamics in corporate boards," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 322(C), pages 567-582.
  • Handle: RePEc:eee:phsmap:v:322:y:2003:i:c:p:567-582
    DOI: 10.1016/S0378-4371(02)01930-1
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    References listed on IDEAS

    as
    1. Galam, Serge & Zucker, Jean-Daniel, 2000. "From individual choice to group decision-making," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 287(3), pages 644-659.
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    Cited by:

    1. Franco Ruzzenenti & Andreas Joseph & Elisa Ticci & Pietro Vozzella & Giampaolo Gabbi, 2015. "Interactions between financial and environmental networks in OECD countries," Papers 1501.04992, arXiv.org, revised Apr 2015.
    2. Niamh Brennan, 2006. "Boards of Directors and Firm Performance: is there an expectations gap?," Corporate Governance: An International Review, Wiley Blackwell, vol. 14(6), pages 577-593, November.
    3. Weisbuch, Gérard & Battiston, Stefano, 2007. "From production networks to geographical economics," Journal of Economic Behavior & Organization, Elsevier, vol. 64(3-4), pages 448-469.
    4. Hendrickx, Julien M., 2008. "Order preservation in a generalized version of Krause’s opinion dynamics model," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(21), pages 5255-5262.
    5. Lublóy, Ágnes & Szenes, Márk, 2007. "Az ügyfélelvándorlás kereskedelmi banki modellezése
      [Modelling the migration of commercial bank clients]
      ," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 915-934.
    6. Gerard Weisbuch & Stefano Battiston, 2005. "Production networks and failure avalanches," Papers physics/0507101, arXiv.org.
    7. Piccardi, Carlo & Calatroni, Lisa & Bertoni, Fabio, 2010. "Communities in Italian corporate networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(22), pages 5247-5258.
    8. John S. Liu & Chyan Yang, 2008. "Herding of Corporate Directors in Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(4), pages 109-123, July.
    9. repec:spr:jeicoo:v:12:y:2017:i:2:d:10.1007_s11403-015-0165-5 is not listed on IDEAS
    10. 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.
    11. John S. Liu & Chyan Yang, 2008. "Herding of Corporate Directors in Taiwan," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 44(4), pages 109-123, July.
    12. Iori, Giulia & De Masi, Giulia & Precup, Ovidiu Vasile & Gabbi, Giampaolo & Caldarelli, Guido, 2008. "A network analysis of the Italian overnight money market," Journal of Economic Dynamics and Control, Elsevier, vol. 32(1), pages 259-278, January.
    13. Serguei Saavedra & Luis J. Gilarranz & Rudolf P. Rohr & Michael Schnabel & Brian Uzzi & Jordi Bascompte, 2014. "Stock fluctuations are correlated and amplified across networks of interlocking directorates," Papers 1410.6646, arXiv.org.
    14. 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.
    15. Weimer-Jehle, Wolfgang, 2008. "Cross-impact balances," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 387(14), pages 3689-3700.

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