Board interlocking in Brazil: Director participation in multiple companies and its effect on the value of firms

Rafael Liza Santos () and Alexandre Di Miceli da Silveira ()
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Rafael Liza Santos: FEA/USP
Alexandre Di Miceli da Silveira: FEA/USP

Brazilian Review of Finance, 2007, vol. 5, issue 2, 125-163

Abstract: This paper investigates the simultaneous participation of directors in different companies from 320 Brazilian listed firms in 2003 and 2005. We identify which firms are connected through a network of directors, which corporate characteristics contribute to this phenomenon, and if board interlocking influences firm value and operational performance. The results show that interlocking directorates are a common practice in Brazil. Besides, larger boards, more dispersed ownership structures, and larger firm size are factors associated with a high level of board interlocking. Moreover, we find that firm value is, on average, negatively impacted by higher levels of board interlocking, especially on firms with board of directors considered too busy (those in which a majority of directors hold three or more directorships) or on firms where their CEO hold directorships in other companies. Besides being a pioneer work on this field in Latin America, the paper provides subsides for the preparation of good corporate governance practices from regulators regarding the effectiveness of multiple directorships and its consequences for corporate value.

Keywords: Corporate Governance; Corporate Finance (search for similar items in EconPapers)
JEL-codes: G32 G34 (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:brf:journl:v:5:y:2007:i:2:p:125-163

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