Abstract
Prior research shows both positive and negative effects of prestigious directors on firm performance. This study provides further evidence for a generally positive effect of prestigious directors by focusing on performance effects of directors with additional directorships in large companies. However, this study also presents evidence that the institutional setting regarding elitism is an important moderator for the relationship between the presence of prestigious directors and firm performance. The extent of elite favoring behavior of prestigious directors that can cause cost for companies depends on institutional characteristics of a country’s corporate elite circle. We present evidence that the positive performance effect of prestigious directors is reduced when the identification with the elite is strong and when elites are cohesive and exclusive. Using a 17-country sample covering the years from 2005 to 2010, we show that the overall effect of prestigious directors on company performance is positive, but decreases with identification, cohesion and exclusiveness of the corporate elite.
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