Exploring the Crucial Link between Boardroom Centrality and Stock Price Informativeness

Chyi-Lun Chiou, Pei-Gi Shu and Wen-Hsin Tsai
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Chyi-Lun Chiou: Department of Business Administration, Fu Jen Catholic University
Pei-Gi Shu: Department of Business Administration, Fu Jen Catholic University
Wen-Hsin Tsai: The Center for Economic Forecasting, Chung-Hua Institution for Economic Research

Czech Journal of Economics and Finance (Finance a uver), 2025, vol. 75, issue 3, 303-342

Abstract: This study examines the information transmission function of board interlocks by analyzing the relationship between board centrality and stock return synchronicity. Using a sample of Taiwanese listed firms from 2007 to 2024, we find a significant positive relationship between board centrality and stock return synchronicity. Board centrality facilitates information transmission among interlocking firms, causing more firm-specific information to be leaked and factored into current prices. This results in less surprise when new information is disclosed in the future. Consequently, market factors should explain more stock returns, leading to higher stock return synchronicity. The role of informativeness is further supported by evidence showing a negative moderating effect of analyst coverage and stock turnover, and a positive moderating effect of group holding. The empirical results remain robust with alternative definitions of centrality measures and considerations of endogeneity. Our findings suggest that the information environment improves with interlocking directorates.

Keywords: board centrality; stock return synchronicity (search for similar items in EconPapers)
JEL-codes: G14 G30 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:fau:fauart:v:75:y:2025:i:3:p:303-342

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