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The Small Core of the German Corporate Board Network

  • Simone Alfarano
  • Thomas Lux
  • Mishael Milakovic

We consider the current bipartite graph of German corporate boards and identify a small core of directors who are highly central in the entire network while being densely connected among themselves. To identify the core, we compare the actual number of board memberships to a random benchmark, focusing on deviations from the benchmark that span several orders of magnitude. It seems that the board appointment decisions of largely capitalized companies are the driving force behind the existence of a core in Germany’s board and director network. Conditional on being a board member, it is very improbable to obtain a second membership, but multiple board membership becomes increasingly likely once this initial barrier is overcome. We also present a simple model that describes board appointment decisions as a trade-off between social capital and monitoring ability

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Paper provided by Kiel Institute for the World Economy in its series Kiel Working Papers with number 1446.

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Length: 19 pages
Date of creation: Sep 2008
Date of revision:
Handle: RePEc:kie:kieliw:1446
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  1. Tirole, Jean, 2001. "Corporate Governance," Econometrica, Econometric Society, vol. 69(1), pages 1-35, January.
  2. S. Battiston & M. Catanzaro, 2004. "Statistical properties of corporate board and director networks," The European Physical Journal B - Condensed Matter and Complex Systems, Springer, vol. 38(2), pages 345-352, 03.
  3. Abe, Naohito & Shimizutani, Satoshi, 2007. "Employment policy and corporate governance-- An empirical comparison of the stakeholder and the profit-maximization model," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 346-368, June.
  4. Benjamin E. Hermalin & Michael S. Weisbach, 2001. "Boards of Directors as an Endogenously Determined Institution: A Survey of the Economic Literature," NBER Working Papers 8161, National Bureau of Economic Research, Inc.
  5. Pagano, Marco & Volpin, Paolo, 2002. "Managers, Workers and Corporate Control," CEPR Discussion Papers 3649, C.E.P.R. Discussion Papers.
  6. Assar Lindbeck & Dennis J. Snower, 2001. "Insiders versus Outsiders," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 165-188, Winter.
  7. Alfarano, Simone & Milakovic, Mishael, 2009. "Network structure and N-dependence in agent-based herding models," Journal of Economic Dynamics and Control, Elsevier, vol. 33(1), pages 78-92, January.
  8. Caldarelli, Guido & Catanzaro, Michele, 2004. "The corporate boards networks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 338(1), pages 98-106.
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