Director Networks and Firm Value
58 Pages Posted: 6 Apr 2020 Last revised: 12 Jun 2021
Date Written: December 7, 2020
Are the professional networks of directors valuable? To separate the effect of director networks on firm value from the effect of other value-relevant director attributes, we use the unexpected deaths of directors as a shock to the director networks of interlocked directors. By studying the announcement returns and using a difference-in-differences methodology, we find the negative shock to director networks reduces the value of interlocked firms – a result that is stronger for firms that are more likely to benefit from access to information from board connections. This evidence is consistent with director networks being valuable and improving access to information.
Keywords: Board of Directors, Network Centrality, Quasi-natural Experiment, Firm Value
JEL Classification: G3, G32, D85, L14
Suggested Citation: Suggested Citation