Boardroom networks and corporate investment

Suyong Song and Wang, Jiawei (Brooke)

Journal of Corporate Finance, 2024, vol. 84, issue C

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.

Keywords: Network effects; Strategic herding; Information quality; Board interlock; Investment (search for similar items in EconPapers)
JEL-codes: C36 D25 G30 L14 L20 (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:84:y:2024:i:c:s0929119923001712

DOI: 10.1016/j.jcorpfin.2023.102522

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