Too many hats? The impact of board members affiliations on firm performance

Huy Viet Hoang ()
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Huy Viet Hoang: University of Economics Ho Chi Minh City

Economics of Governance, 2025, vol. 26, issue 3, No 3, 337-370

Abstract: Abstract Drawing on the burgeoning literature on board networks, this study delves into how board member affiliations – an under-researched perspective – influence firm performance. Using a sample of non-financial U.S. listed firms from 2003 to 2023, I unveil that firms with directors holding a greater number of external affiliations experience lower performance. This effect is insensitivity to various model specifications and endogeneity tests. Further analysis reveals two channels through which the effect transmits, namely low board diligence and heightened operational risks. Although directors’ multiple affiliations are detrimental to business outcomes, the presence of multi-affiliated directors (MADs) can reduce equity constraints among firms that are under financial difficulties. The findings from this study offer helpful implications regarding the appointment and contracting of director candidates who are simultaneously serving as board members or executives in other organizations to mitigate the risks arising from limited commitment and operational mismanagement. This study also highlights the strategic value of MADs in financially distressed firms, where their connections can help ease equity financing constraints and enhance access to external capital.

Keywords: Board diligence; Board member affiliations; Financial constraints; Firm performance; Operational risk; G30; G34 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s10101-025-00333-3

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