The dark side of board network centrality: Evidence from merger performance

Qizhi Tao, Haoyu Li, Qun Wu, Ting Zhang and Yingjun Zhu

Journal of Business Research, 2019, vol. 104, issue C, 215-232

Abstract: We show that greater board network centrality is associated with lower acquirer stock returns in the Chinese capital market. This negative effect is mainly due to inside directors' networks, and is stronger for state-owned enterprises. Firms with greater board centrality tend to engage in more value-destroying mergers and acquisitions, and board directors with more centrality utilize their connections for private benefits at the expense of shareholder wealth. Consistent with an integrated agency–resource dependence perspective, the results imply both board directors' motivation derived from their independence and social capital–related ability are important considerations in their monitoring and advising functions.

Keywords: Social network; Merger and acquisition; Insiders; Chinese capital market (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbrese:v:104:y:2019:i:c:p:215-232

DOI: 10.1016/j.jbusres.2019.07.019

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