Interlocking Directorates and Firm Performance
Date Issued
2008
Date
2008
Author(s)
Chao, Yi-Ting
Abstract
Interlocking directorates between two firms occur if the firms share one or more directors in their board of directors. This thesis explores the effect of interlocking directorates on firm performance. Interlocking directorates can be regarded as a way for firms to obtain some required resources and information. The sum of these resources and information constitute one of the social capital that firms possess. Firms can benefit from the social capital and then improve their performance. In this thesis, the social capital formed through interlocking directorates is measured by social network analysis. he results suggest that if a firm (1) has more interlocking directorates, (2) has more board members from different industries, (3) is closer to other firms in the social network, and (4) is the bridges between other firms in the social network, then the firm will have better performance. Therefore, interlocking directorates can be a valuable strategy for firms to enhance their performance.n addition, this thesis also examines “Busyness Hypothesis”. This hypothesis argues that if a director sits on too many boards, he/she will be too busy to fulfill the obligation of a director. As a result, those busy directors will hurt firms’ performance. But the result of this thesis doesn’t support Busyness Hypothesis.
Subjects
interlocking directorates
social capital
social network analysis
firm performance
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