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Boardroom networks and corporate investment

Author

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  • Song, Suyong
  • Wang, Jiawei (Brooke)

Abstract

This paper investigates whether network effects on investment exist and whether firms strategically herd their connected firms. To construct firm networks, we utilize board-interlock networks where two firms share at least one common board member and estimate network effects on firms’ investment decisions. Our identification strategy is built on adopting characteristics of the peers of peers as legitimate instrumental variables. Empirical findings confirm significant network effects on firms’ investment and show that firms strategically follow their connected firms with high-quality information.

Suggested Citation

  • Song, Suyong & Wang, Jiawei (Brooke), 2024. "Boardroom networks and corporate investment," Journal of Corporate Finance, Elsevier, vol. 84(C).
    • Handle: RePEc:eee:corfin:v:84:y:2024:i:c:s0929119923001712
    DOI: 10.1016/j.jcorpfin.2023.102522
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Network effects; Strategic herding; Information quality; Board interlock; Investment;
    All these keywords.

    JEL classification:

    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General

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