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Directors as Connectors: The Impact of the External Networks of Directors on Firms

Author

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  • Quoc-Anh Do

    (Département d'économie)

  • Yen-Teik Lee

    (Singapore Management University)

  • Bang Dang Nguyen

    (University of Cambridge [UK])

Abstract

The external networks of directors significantly impact firm value and decisions. Surrounding close gubernatorial elections, local firms with directors connected to winners increase value by 4.1% over firms connected to losers. Director network’s value increases with network strength and activities, and is not due to network homophily. Connected firms are more likely to receive state subsidies, loans, and tax credits. They obtain better access to bank loans, borrow more, pay lower interest, invest and employ more, and enjoy better long-term performance. Network benefits are concentrated on connected firms, possibly through quid pro quo deals, and unlikely spread to industry competitors.

Suggested Citation

  • Quoc-Anh Do & Yen-Teik Lee & Bang Dang Nguyen, 2016. "Directors as Connectors: The Impact of the External Networks of Directors on Firms," Sciences Po publications 52, Sciences Po.
  • Handle: RePEc:spo:wpmain:info:hdl:2441/5q8d3q8agf8hdbs42laqdfujkb
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    1. repec:bla:finmgt:v:47:y:2018:i:2:p:209-251 is not listed on IDEAS
    2. Marco Battaglini & Eleonora Patacchini, 2018. "Influencing Connected Legislators," Journal of Political Economy, University of Chicago Press, vol. 126(6), pages 2277-2322.

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    Keywords

    External Networks of Directors; Board of Directors; Connectors; Regression Discontinuity Design; Close Gubernatorial Election;

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