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Interlocking directorates and business groups: Belgian evidence

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  • ROMMENS, An
  • CUYVERS, Ludo
  • DELOOF, Marc

Abstract

We investigate the determinants of interlocking directorates and their impact on company performance for a Belgian sample of 286 companies affiliated with a business group and 2,136 stand-alone companies. Most of these companies are not listed. We find that companies belonging to a group have much more interlocking directorates than stand-alone companies. Group companies tend to be strongly interlocked with other group members, including parent companies, and they have more intra-group interlocks when they are located at a higher hierarchical group level. Group companies have more vertical interlocks when they are involved in an internal capital market and when they are affiliated with a diversified business group. We also find that while interlocking directorates are negatively related to the profitability of stand-alone companies, they do not affect the profitability of group companies. This suggests that directors in Belgian business groups are not “too busy”, and that intra-group interlocks are not facilitators of expropriation by controlling shareholders.

Suggested Citation

  • ROMMENS, An & CUYVERS, Ludo & DELOOF, Marc, 2007. "Interlocking directorates and business groups: Belgian evidence," Working Papers 2007023, University of Antwerp, Faculty of Applied Economics.
  • Handle: RePEc:ant:wpaper:2007023
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    Keywords

    Interlocking directorates; Business groups; Holding companies; Company performance;

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