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Corporate Governance and the Uncertain Role of Interlocking Directorates:Director Networks in Germany and their Impact on Financial Performance

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  • Enrico Prinz

    () (Université de Bourgogne)

Abstract

This article deals with interlocking directorates and the increasing attention this topic has been attracting in recent years. Financial theory tends to regard the subject of directorship interlocks generally negative, even if theoretical argumentation also allows speaking favoura-bly of the effects personnel relations have in a firm's perspective. At this point of time, em-pirical findings are contradictory and do not allow making concluding remarks on the impact director ties have on corporate performance. In order to fill this gap, we analyse interlocks between the 30 largest listed German companies from 2001 to 2005 for testing their impact on corporate performance. Our findings indicate that board appointments of executives harm firm performance. However, those interlocks seem to lower managing director compensation of the appointing firm. Interlocks between supervisory board members do not have any influ-ence, neither on financial performance, nor on management payment levels.

Suggested Citation

  • Enrico Prinz, 2006. "Corporate Governance and the Uncertain Role of Interlocking Directorates:Director Networks in Germany and their Impact on Financial Performance," Working Papers CREGO 1061001, Université de Bourgogne - CREGO EA7317 Centre de recherches en gestion des organisations.
  • Handle: RePEc:dij:wpfarg:1061001
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    Keywords

    corporate governance; interlocking directorates; board of directors; firm performance; executive compensation.;

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General

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