Abstract
An examination was performed on whether director interlocks enabled the adoption of a dividend policy for the benefit of the parent company in the ownership structure. Specifically, the study investigated the dependence of the impact of the central position in the board network on the probability of dividend payment. Based on sample of firms listed on Polish capital market, it was observed that the more central the company’s position in the interlocking directorate network, the more likely it is to pay dividends to a subsidiary. This effect is related to the eigenvector centrality. The results obtained suggest that corporate financial policy can be spread across firms through the board network.
Highlights
Dariusz SiudakAs Schoorman et al [114] pointed out, for a host company, the outside director (the relationship of reception) risks losing partial autonomy and its own control over the organization’s affairs and flexibility in decision-making
E board of directors and the interlocking directorate network created through it is an important element of corporate governance. e company often consciously decides to establish relations with other companies by joining the interlocking network. is can be carried out by accepting an external board member from another organization or by delegating a director to the board of directors of another company
Complexity as well as the most widely used in the external environment of the organization [6, 7]. is strategy is applied especially in cases where the enterprise operates in conditions of uncertainty, interorganizational interdependence, control of other organizations, organizational complexity, concentrated ownership structure, and inability to legalize ownership links
Summary
As Schoorman et al [114] pointed out, for a host company, the outside director (the relationship of reception) risks losing partial autonomy and its own control over the organization’s affairs and flexibility in decision-making For an enterprise, this is the cost of participating in an interlocking network, expecting a number of benefits related to the transfer of knowledge, information, or diffusion of organizational solutions. This is the cost of participating in an interlocking network, expecting a number of benefits related to the transfer of knowledge, information, or diffusion of organizational solutions With this in mind, there is another reason for recommending the payment of dividends to owners as a policy of redistributing net profit generated by a subsidiary to its parent company. On the basis of the above-mentioned considerations, the following hypothesis has been formulated. e higher the firm’s board interlock centrality is, the higher probability that the dividend will be paid
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