Board Interlocks Research Articles

The multilevel determinants of overlapping membership on board committees: Evidence from Chinese banks

This study manually collects data on 4090 board committee members from 36 listed banks in 11 regions of China from 2007 to 2020, uses a hierarchical linear model, and integrates institutional and resource dependence theories to examine the multilevel determinants of overlapping membership on board committees. The results show that low legalization and the absence of chief risk officers promote overlapping membership on board committees. Directors who have financial expertise, are shorter-tenured, and do not have social relationships with senior leaders sit on more board committees. Further analysis shows that information and resource needs are more likely to drive overlapping membership on board monitoring committees, and independent directors with lower information acquisition costs sit on more board committees. The moderating analysis between multilevel factors shows that legalization and the presence of chief risk officers substitute for, while religion and board interlocks complement director-level information and resource needs.

Decarbonization, hegemonic projects, and the green growth policy-planning network: the case of Québec

ABSTRACT Since 2010, grassroots-led socio-ecological movements in Québec, Canada played a key role in overturning carbon extractivist proposals. Building on their successes, these groups now aim to move energy transition debates toward a broader conception of transition that includes radical social justice and post-capitalist alternatives. Meanwhile, corporate actors and the state enlisted major environmental NGOs and union federations into various technocentric ‘green growth’ projects. These hegemonic and counter-hegemonic struggles define how transition unfolds in the province, yet few have studied how actual social actors organize to carry out these divergent responses to the climate crisis. We develop a structural analysis of the green growth policy-planning network in Québec. Starting from five organizations at the core of transition debates, we analyze the network of board interlocks they are embedded in. We describe the overall structure of the network and its main corporate, civil society, and individual actors. Analysis outlines the possibility of a new hegemonic bloc forming, positioned around the green growth project and the cleantech sector, close to achieving dominance in Quebec, that would threaten deeper decarbonization efforts. Thus, despite the recent ban on petroleum extraction, like elsewhere, energy transition in Quebec still faces deep social and ecological contradictions.

A Structuration Perspective on Board Interlocks and Corporate Strategic Action

A Structuration Perspective on Board Interlocks and Corporate Strategic Action

Coevolution of Board Interlocks and Digital Transformation: Learning About Business Model Innovation

Coevolution of Board Interlocks and Digital Transformation: Learning About Business Model Innovation

EXPRESS: Getting the Board on Board: Marketing Department Power and Board Interlocks

Although the power held by the marketing department can determine key organizational outcomes, including firm performance, this power seemingly has been decreasing. To address this apparent disconnect, the authors propose that the board of directors is a critical but overlooked antecedent of marketing department power (MDP). In particular, the authors demonstrate that directors’ exposure through board service at other firms (i.e., board interlocks) affects MDP in the firms on whose boards they also serve (i.e., focal firms). A sample of 6,008 firms, spanning 2007–2021, reveals that MDP in board-interlocked firms has a positive effect on MDP in focal firms. Despite evidence that board interlock effects have diminished or even disappeared, the findings suggest the board interlock effect remains a potent antecedent of MDP—and this effect did not decrease during the observation period. Adapting the 3R (reach–richness–receptivity) framework, the authors also find that the board interlock effect increases with greater reach and richness of a focal firm’s board interlock network and its executives’ receptivity to information. The marketing department’s decreasing power is concerning for the discipline; the robust results of this study suggest that firms need to get the board “on board” to stem this diminishing trend.

Peer Effects on Corporate Social Responsibility Engagement of Chinese Construction Firms through Board Interlocking Ties

Peer Effects on Corporate Social Responsibility Engagement of Chinese Construction Firms through Board Interlocking Ties

Board network and ESG performance: Evidence from China

AbstractAs ESG (Environmental, Social, and Governance) principles increasingly shape the trajectory of global economic and societal sustainability, our study delves into how a firm's network dynamics influence its ESG performance within the Chinese landscape spanning from 2011 to 2020. Drawing insights from agency theory, resource dependence theory, and social network theory, we uncover a notable correlation between board interlocking and ESG performance. This correlation suggests that well‐connected directors can potentially enhance a firm's ESG performance by facilitating information gathering, monitoring, advising, and leveraging influence to address stakeholders' concerns. Moreover, our analysis reveals that the characteristics of ownership structure, as gauged by indicators such as institutional ownership, control‐cash flow wedge, and state‐owned ownership, serve as positive moderators in this relationship. Conversely, board structure, as evaluated by board independence, does not exhibit a significant moderating effect. Additionally, we uncover noteworthy mediating effects of firm size and institutional shareholding on the relationship between board interlocking and ESG performance. Importantly, our findings hold robust across various sensitivity analyses, including alternative model specifications, variable definitions, and strategies to mitigate potential endogeneity concerns.

Corporate network formation in Kuwait: board interlocks network analysis using exponential random graph models

PurposeInterlocking directorates are a common phenomenon across several markets around the world. Yet, the institutional environment and the role of corporate elites in forming board networks promote some developing markets as a unique setting to understand the corporate boards network structure. This study aims to first explore the board directors’ network of all publicly listed companies in Kuwait. This paper then evaluates the effects of exogenous factors and endogenous network structural processes on the likelihood of board interlock.Design/methodology/approachThis study analyzes the interlocks network structures of 167 listed companies in 13 different market sectors in Kuwait relying on hand-collected directors’ data and using four measures of network centrality: betweenness, degree, closeness and eigenvector. The authors predict board interlocks using exponential random graph models (ERGM) and firm-level information from the Bloomberg database.FindingsThis study observes that both the firms and directors’ networks consist of 55 components, with the largest component containing about half of the total number of firms/directors. The firm’s network consists of one giant component of 85 firms, including all but one bank. This study shows the importance of endogenous network variables, such as the number of edges, centralization and triangles on the estimation of the factors that promote the board interlocks. Highly centralized firms are less likely to interlock with other firms, while two firms that are interlocked with a common third firm are more likely to interlock.Originality/valueThis paper is the first to analyze in-depth the structure of the directors network of companies in Kuwait. This study illustrates the complex map of interfirm and directors social networks in Kuwait. To the best of the authors’ knowledge, this study is among the first to exploit ERGM in the context of board interlocks to account for potential cross-dependencies and emergent network structures. Managers can identify the director interlock with other firms in the network and take advantage of the connection as a source of external knowledge and influence.

Mapping science through editorial board interlocking: connections and distance between fields of knowledge and institutional affiliations

Research is a global enterprise underpinned by the general belief that findings need to be true to be considered scientific. In the complex system of scientific validation, editorial boards (EBs) play a fundamental role in guiding journals’ review process, which has led many stakeholders of sciences to metaphorically picture them as the “gatekeepers of knowledge.” In an attempt to address the academic structure that governs sciences through editorial board interlocking (EBI, the cross-presence of EB members in different journals) and social network analysis, the aim of this study is threefold: first, to map the connection between fields of knowledge through EBI; second, to visualize and empirically test the distance between social and general sciences; and third, to uncover the institutional structure (i.e., universities) that governs these connections. Our findings, based on the dataset collected through the Open Editors initiative for the journals indexed in the JCR, revealed a substantial level of collaboration between all fields, as suggested by the connections between EBs. However, there is a statistically significant difference between the weight of the edges and the path lengths connecting the fields of natural sciences to the fields of social sciences (compared to the connections within), indicating the development of different research cultures and invisible colleges in these two research areas. The results also show that a central group of US institutions dominates most journal EBs, indirectly suggesting that US scientific norms and values still prevail in all fields of knowledge. Overall, our study suggests that scientific endeavor is highly networked through EBs.

Board Interlocks and Company Outcomes: A Managerial Accounting Case

Board interlocks are formed between two company boards when these companies share at least one common director, resulting in a reciprocal relationship from which both partners expect to benefit. Such conditions imply that directors in these interlocks will be less likely to provide strict monitoring oversight (Beckman, Haunschild, Phillips, 2004). This case examines the ethical and governance issues arising from board interlocks. The analysis examines further how board interlocks are less likely to provide strict monitoring functions on firm operations and financial reporting. Participants noted that since board interlocks imply that companies co-share members on their boards in a reciprocal relationship from which both partners expect to benefit, such conditions lead to less rigorous monitoring oversight. Participants also noted that board interlocks may create openings for operational practices with adverse firm outcomes, such as ineffective internal controls over financial reporting.

Think tanks and climate obstruction: Atlas affiliates in Canada.

This paper provides a longitudinal social network and content analysis of Canadian think tanks affiliated with the Atlas network, analyzing their efforts to obstruct climate action over the last two decades. Network analysis reveals extensive and deepening board interlocks and joint memberships between these think tanks and the fossil fuel industry, other policy-planning organizations within and beyond Canada, and academic institutions. Consistent with and rooted in network ties, Atlas members produce a large and growing volume of climate-related content, including content that denies the reality and impacts of climate change, promotes and defends the fossil fuel sector, and opposes climate policy and action. Atlas affiliates are argued to be at the core of a reactionary segment of Canada's elite policy-planning network opposed to virtually all forms of climate action, while the frames and campaigns they deploy are seen as a force obstructing progress on climate change.

R&D investments in emerging market firms: the role of institutional investors and board interlocks

Despite the increase in institutional investor shareholdings in emerging market firms, their impact on R&D investments has received scant attention in the literature. By integrating agency and resource dependence perspectives, we examine the role of different types of institutional investors and their interactions with board interlocks in shaping their preference for R&D investment in their portfolio firms. We test our hypotheses on a sample of 2,478 Indian firm‐year observations from 2005 to 2019, using various estimation techniques. Our results indicate that different categories of institutional investors have distinct preferences for R&D investment. Specifically, we find that ownership by both foreign institutional investors and mutual fund investors negatively impacts R&D investments in firms. While board interlocks positively moderate the impact of institutional investors such as banks and financial institutions and foreign institutional investors on R&D investments in firms, this moderation is negative in the case of mutual fund investors and R&D investments in firms. We contribute to the understanding of the determinants of R&D investments in emerging market firms, with a specific focus on institutional investor ownership and add to the nascent literature on the interaction between two forms of governance, i.e., ownership and board characteristics, in shaping this firm strategy.

Network Centrality and Dissent Voting by Directors on Boards

AbstractWe investigate how directors’ positions within board interlocking networks influence their monitoring behaviors from a social network perspective. We argue that the effectiveness of directors’ monitoring of a firm's management depends on their ability to overcome the information barrier and their motivation to develop a public reputation in the directorship market. We further contend that network centrality can supplement directors’ existing information set and facilitate reputation spillover, leading to an increase in the extent of their dissent on boards. We analyze the unique individual-director-level data of Chinese firms and find that directors occupying positions of greater centrality in the board interlock network are more likely to dissent. We then examine the underlying mechanisms of information and reputation through two moderators: firm transparency and media mention of a director. We also find that the effect of network centrality on dissent is weaker for independent directors. Our study advances the corporate governance literature by examining the micro-foundations of board monitoring and providing a social network perspective.

The influence of board interlocks and sustainability experience on transparent sustainability disclosure

AbstractWe investigate board interlocks and their relationship to the transparency of sustainability disclosure, drawing on the theoretical perspectives of resource dependence theory and agency theory. We ascertain that board members who gain sustainability experience by serving on another board will influence the transparency of sustainability disclosure for the focal firm. The study analyzes data from S&P 1500 firms in the U.S. from 2009 to 2018, using ordinary least squares regressions. Our findings demonstrate that the focal firms' sustainability disclosure will be more transparent if their boards have interlocking directors with experience gained from other boards in current or prior years. Furthermore, we find that the sustainability experience of interlocked firms interacts with both gender diversity and board independence, leading to an enhancement in the transparency of sustainability disclosure. In addition, we conduct robustness tests such as performing propensity score matching, controlling for firm fixed effects, and applying entropy matching. These additional tests provide consistent results to confirm and strengthen our findings.

Director Interlocks: Information Transfer in Board Networks

Director interlocks occur when a board member or an executive of a firm sits on the board of directors of another firm. As an essential social network application in the business world, interlocking directorates are documented to be non-trivial from the 1930s and continue to gain popularity thereafter. Corporate information and business practices can be transferred to another firm through an interlocking director sitting on both companies’ boards. Such information dissemination leads to changes in an interlocking firm’s decision-making processes. Existing business research attempts to decipher the underlying reasons why board interlocks become prevalent, how and what information is being transferred through this channel, and the intended or unintended consequences to firm strategic, governance, financing, and accounting practices. We first introduce theoretical research on board interlocks in management and then follow up with empirical evidence in finance and accounting. Since extant studies have not reached a consensus on various consequences of board interlocks, we contribute to the literature by summarizing the findings from multi-business disciplines, discussing their advantages and disadvantages, and calling for more research on the topic.

Discussion of “Impact of Audit Committee Social Capital on the Adoption of COSO 2013”

I organize my discussion of “Impact of Audit Committee Social Capital on the Adoption of COSO 2013” by Farah, Islam, Tadesse & McCumber (2023) around the following themes: the use of board interlocks vs. comprehensive board social connectiveness ties in prior literature, the use of other methodologies (i.e. survey, interviews) to augment findings and provide a source of issues where audit committee members confer with their social networks, and lastly how future studies can use a similar framework to examine the role that audit committee network ties have in disseminating information.

The role of board interlocks in increasing the use of wood in Norwegian construction

This paper studies the existence of board interlocks between wood-based firms in the Norwegian construction supply chain and firms in other industries, and their role in enabling increased use of wood in construction. Wood-based construction remains a niche market globally. The literature highlights two main barriers to wood-based construction: 1) lack of expertise with the material, and 2) lack of coordination and collaboration across the supply chain. As a form of interfirm governance structure, board interlocks may promote innovation in construction, such as applying new materials, products and processes, by fostering strategic collaborations. Drawing on resource dependence theory (RDT) and the theory of dynamic capabilities, we explore this through analysis of registry data, interviews and case studies. It was found that the majority of wood-based firms have board interlocks and that a majority of the firms they are interlocked with belong to industries within the construction supply chain. It was also found that the role of these board interlocks is primarily to secure access to immaterial resources, such as knowledge, expertise and skills, which enables the wood-based firms to engage in processes (sensing, seizing, and reconfiguration) that are important for their dynamic capabilities and therefore closely related to their ability to innovate.

Beyond boardroom diversity and environmental, social, and governance transparency: Evidence of the emerging market firms

Since its inception, the environmental, social, and governance (ESG) framework has increasingly captured the attention of stakeholders across the globe. The Malaysian government, recognizing the critical importance of ESG principles, has actively advocated for enhanced transparency within the private sector by mandating comprehensive ESG disclosure among public-listed companies (PLCs). Responding to Ismail and Latiff’s (2019) call, this study explored the complex interplay between boardroom dynamics and ESG disclosure, integrating stakeholder theory, agency theory, and resource dependency theory to illuminate the multifaceted relationships within this context. Utilizing the weighted least squares (WLS) regression method, this research meticulously analyzed 63 firms’ data from 2018 to 2022, examining how various board characteristics influence ESG disclosure practices. The findings revealed a significant positive correlation between board expertise, foreign board presence, and board interlocking with ESG disclosure, while larger board sizes were found to negatively impact ESG disclosure practices. These insights not only highlight how specific board attributes enhance or hinder effective governance and ESG practices but also pave the way for policymakers and practitioners to develop actionable strategies that further promote ESG principles. Moreover, this study opened new avenues for academic inquiry, providing a robust foundation for future research on corporate governance and ESG.

Board Interlock Networks and Corporate Low-Carbon Innovation in China: Does Position Matter?

Through combining the resource dependence theory and social network theory, this study sheds light on how two major kinds of interlocking network positions—central network position and structural holes position—drive corporate low-carbon innovation. We consider the mediating effect of information asymmetry and knowledge absorptive capacity to reap benefits from occupying the two advantageous network positions. We have empirically investigated a sample of 3365 listed firms over the period of 2009–2018 drawn from China, the largest emerging market economy as well as the biggest carbon dioxide emitter. Our main results show that either holding a central network position or spanning a structural holes position plays a significant role in stimulating low-carbon technologies, and the promotion effect can be partially channeled through downward information asymmetry and upward knowledge absorptive capacity. Our findings differ from earlier work because of our emphasis on network position, and our specific focus on corporate low-carbon innovation and China's unique setting, rather than network size, greenhouse gas emissions, and developed economies. This study also provides significant implications for executives striving to improve firms’ low-carbon innovation performance, and for policymakers seeking ways to fulfill the mission of carbon dioxide abatement.

Interlocking boards and firm outcomes: a review

PurposeThis paper explores the relationship between board interlocks and firm outcomes by reviewing the most recent peer-reviewed articles examining this research theme.Design/methodology/approachA systematic and bibliometric methodology of assessing 369 peer-reviewed articles from the Web of Science (WoS) database was applied. The study also leverages key R-packages litsearchr and Bibliometrix software to enhance the descriptive and thematic literature analysis to identify gaps and opportunities for new research.FindingsThis study confirms a rapid increase in articles on this thematic area, over the last decade, with increasing collaboration occurring among researchers in the United States, Europe, China, South Korea and India. Four core research clusters are identified. The first and largest cluster links interlocked directors to issues related to corporate governance and firm outcomes. The second cluster links social network theory, interlocking directorates and firm outcomes. Smaller emerging research clusters include topics related to ownership structure, board size, political connectedness and impacts on firm outcomes. The final cluster examines the influence of board interlocks on market value and firm innovation.Practical implicationsInterlocked directors can have both positive and negative impacts on a wide variety of firm outcomes. This study places great interest in the selection of new directors, ensuring that the selection has aligned with the needs and interests of the company and disclosures of potential competing interests are declared and considered. Equally important are the governance practices used to monitor directors' behavior and to protect the interest of shareholders and the firm. This is particularly relevant in the internal appointment of interlocked directors to critical positions, such as audit committees or instances where interlocked directors may simultaneously hold CEO or executive leadership positions in other companies.Originality/valueThis paper examines the board interlocks literature related to firm outcomes. Additionally, this review identifies several topics and disciplines which, if pursued, could enrich the literature and promise new avenues for future research.