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The Old Boys Club in New Zealand Listed Companies

Author

Listed:
  • Chen Chen

    (Hope College Business School, Southwest Jiaotong University, Chengdu 610400, China)

  • David K. Ding

    (Lee Kong Chian School of Business, Singapore Management University, Singapore 178899, Singapore)

  • William R. Wilson

    (School of Economics & Finance, Massey University, Auckland 0632, New Zealand
    Deceased; this paper is dedicated to the honor of Bill Wilson.)

Abstract

The board of directors plays an important role in implementing corporate governance in the firm, as directors have a fiduciary duty to the firm’s shareholders. The effectiveness of directors is a key determinant of corporate value and they need to bring a range of skills and experience to the boardroom. This skill and experience cannot be developed solely within the firm, and most boards incorporate non-executive directors who are or have been directors of other firms. Current research on the benefits of interlocking directorships is mixed between the claim that they bring outside feedback to the table and open decision makers’ minds, and those who think outside directors are a waste of money and can reduce company performance. This paper investigates the extent of interlocking directorship in New Zealand and how it affects corporate performance. Our findings of largely no significant impact on firm performance are consistent with the management control theory of director interlocks; the exceptions support the class hegemony theory that links interlocking directorship with a negative firm performance.

Suggested Citation

  • Chen Chen & David K. Ding & William R. Wilson, 2021. "The Old Boys Club in New Zealand Listed Companies," JRFM, MDPI, vol. 14(8), pages 1-21, July.
    • Handle: RePEc:gam:jjrfmx:v:14:y:2021:i:8:p:342-:d:599250
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    References listed on IDEAS

    as
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