Boardroom centrality and firm performance

David F. Larcker, Eric C. So and Charles C.Y. Wang

Journal of Accounting and Economics, 2013, vol. 55, issue 2, 225-250

Abstract: Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast errors. Return prediction, return-on-assets growth, and analyst errors are concentrated among high growth opportunity firms or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms standing to benefit most from information and resources exchanged through boardroom networks. Overall, our results suggest that director networks provide economic benefits that are not immediately reflected in stock prices.

Keywords: Board of director networks; Analyst forecasts; Market efficiency (search for similar items in EconPapers)
JEL-codes: G14 G3 L14 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (199)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:55:y:2013:i:2:p:225-250

DOI: 10.1016/j.jacceco.2013.01.006

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