Locally-rooted directors
Axel Kind () and
Christophe Volonté
Additional contact information
Axel Kind: University of Konstanz
Review of Quantitative Finance and Accounting, 2024, vol. 63, issue 2, No 8, 633-678
Abstract:
Abstract We study the influence of locally-rooted directors (LRDs)—board members with personal ties to a company’s geographic location—on firm performance. On the one hand, LRDs may provide valuable local know-how and access to local networks. On the other hand, as their appointments may go back to social ties with insiders (e.g., corporate directors, top executives, or large shareholders), LRDs may be used to extract rents and lack relevant experience, business skills, and independence. Using the directors’ alma mater as a proxy for local roots, LRDs turn out to be heavily overrepresented, making up 30% of all directors in our sample. We show that LRDs are negatively related to Tobin’s Q. However, this finding does not apply to domestically-oriented companies, i.e., firms without material foreign sales, and firms in regulated industries. Thus, while the results indicate that LRDs harm firm performance on average, their presence may be optimal in some cases.
Keywords: Corporate governance; Board of directors; Social ties; Firm value (search for similar items in EconPapers)
JEL-codes: G30 G34 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:
Downloads: (external link)
http://link.springer.com/10.1007/s11156-024-01266-4 Abstract (text/html)
Access to full text is restricted to subscribers.
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:kap:rqfnac:v:63:y:2024:i:2:d:10.1007_s11156-024-01266-4
Ordering information: This journal article can be ordered from
http://www.springer.com/finance/journal/11156/PS2
DOI: 10.1007/s11156-024-01266-4
Access Statistics for this article
Review of Quantitative Finance and Accounting is currently edited by Cheng-Few Lee
More articles in Review of Quantitative Finance and Accounting from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().