The Effect of Board Overlap on Firm Behavior

Heng Geng, Harald Hau, Roni Michaely and Binh Nguyen
Additional contact information
Heng Geng: Victoria University of Wellington
Binh Nguyen: Victoria University of Wellington - Victoria University of Wellington, Students

No 21-40, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: The staggered introduction of Corporate Opportunity Waivers (COWs) in nine US states since 2000 reduced legal risk to directors serving on multiple boards and increased intra-industry board overlap in firms characterized by intensive R&D activity. More board overlap results in a higher return on assets, higher profit margins, and higher sales revenues in spite of reduced factor inputs. The higher profitability is observed equally for new board overlap with and without own-board alteration, which rules out improved board quality as an explanation. Instead, higher profitability appears to originate in reduced firm rivalry measured by less innovation activity and increased product market segmentation rather than the synergetic exploitation of more and better corporate opportunities.

Keywords: Board interlock; corporate opportunity waivers; firm coordination (search for similar items in EconPapers)
Pages: 63 pages
Date: 2021-07
New Economics Papers: this item is included in nep-bec and nep-com
References: Add references at CitEc
Citations:

Downloads: (external link)
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3887538 (application/pdf)

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:chf:rpseri:rp2140

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute Contact information at EDIRC.
Bibliographic data for series maintained by Ridima Mittal ().