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Exploring the Crucial Link between Boardroom Centrality and Stock Price Informativeness

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  • Chyi-Lun Chiou

    (Department of Business Administration, Fu Jen Catholic University)

  • Pei-Gi Shu

    (Department of Business Administration, Fu Jen Catholic University)

  • Wen-Hsin Tsai

    (The Center for Economic Forecasting, Chung-Hua Institution for Economic Research)

Abstract

This study examines the information transmission function of board interlocks by analyzing the relationship between board centrality and stock return synchronicity. Using a sample of Taiwanese listed firms from 2007 to 2024, we find a significant positive relationship between board centrality and stock return synchronicity. Board centrality facilitates information transmission among interlocking firms, causing more firm-specific information to be leaked and factored into current prices. This results in less surprise when new information is disclosed in the future. Consequently, market factors should explain more stock returns, leading to higher stock return synchronicity. The role of informativeness is further supported by evidence showing a negative moderating effect of analyst coverage and stock turnover, and a positive moderating effect of group holding. The empirical results remain robust with alternative definitions of centrality measures and considerations of endogeneity. Our findings suggest that the information environment improves with interlocking directorates.

Suggested Citation

  • Chyi-Lun Chiou & Pei-Gi Shu & Wen-Hsin Tsai, 2025. "Exploring the Crucial Link between Boardroom Centrality and Stock Price Informativeness," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 75(3), pages 303-342, September.
    • Handle: RePEc:fau:fauart:v:75:y:2025:i:3:p:303-342
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    File URL: https://journal.fsv.cuni.cz/mag/article/show/id/1554
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    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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