Director Connections and Board Advising

56 Pages Posted: 14 Mar 2012 Last revised: 20 Jan 2021

See all articles by Jeffrey L. Coles

Jeffrey L. Coles

University of Utah - Department of Finance

Naveen D. Daniel

Drexel University - Department of Finance

Farooq Durrani

University of Louisville

Lalitha Naveen

Temple University - Department of Finance

Date Written: December 2020

Abstract

We introduce an easy-to-compute measure of board advising: Director Connections. This is the number of unique directors that a firm’s outside directors are connected to through common board service. We find that as firm complexity increases: Director Connections increases, firm value increases with Director Connections, and announcement returns to director appointments increases. The idea that connected directors are valuable advisors is further supported by the findings that connected directors have higher human capital, are paid more, disproportionately represented on advising committees, and do not improve monitoring effectiveness. Our contribution is to document that director connections are valuable in complex firms.

Keywords: Connected Directors; Advising quality; Board advising; Corporate governance; Firm complexity

JEL Classification: G32; G34; K22

Suggested Citation

Coles, Jeffrey L. and Daniel, Naveen D. and Durrani, Farooq and Naveen, Lalitha, Director Connections and Board Advising (December 2020). Available at SSRN: https://ssrn.com/abstract=2002250 or http://dx.doi.org/10.2139/ssrn.2002250

Jeffrey L. Coles

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States
801-587-9093 (Phone)

Naveen D. Daniel

Drexel University - Department of Finance ( email )

LeBow College of Business
Philadelphia, PA 19104
United States
215-895-5858 (Phone)
215-895-2955 (Fax)

HOME PAGE: http://lebow.drexel.edu/Faculty/DanielN

Farooq Durrani

University of Louisville ( email )

Louisville, KY 40292
United States

Lalitha Naveen (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-6435 (Phone)

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