Interlocking Boards and Firm Performance: Evidence from a New Panel Database

Tinbergen Institute Discussion Paper No. 07-034/2

35 Pages Posted: 5 Apr 2007

See all articles by Marielle C. Non

Marielle C. Non

University of Groningen

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics

Date Written: March 29, 2007

Abstract

An interlock between two firms occurs if the firms share one or more directors in their boards of directors. We explore the effect of interlocks on firm performance for 101 large Dutch firms using a large and new panel database. We use five different performance measures, and for each performance measure we design three different panel data models, where we allow the effect of the number of interlocks to be linear, quadratic or square root, either with or without lags. Based on all results we conclude that current interlocks can have a negative effect on future firm performance. We show that this negative effect is jointly established by (1) interlocking directors being too busy and (2) by directors being members of a homogenous upper class group.

Keywords: interlocks, firm performance

JEL Classification: C23, G34, J53, Z13

Suggested Citation

Non, Marielle C. and Franses, Philip Hans, Interlocking Boards and Firm Performance: Evidence from a New Panel Database (March 29, 2007). Tinbergen Institute Discussion Paper No. 07-034/2, Available at SSRN: https://ssrn.com/abstract=978189 or http://dx.doi.org/10.2139/ssrn.978189

Marielle C. Non (Contact Author)

University of Groningen ( email )

P.O. Box 800
Groningen, 9700 AV
Netherlands

Philip Hans Franses

Erasmus University Rotterdam (EUR) - Department of Econometrics ( email )

P.O. Box 1738
3000 DR Rotterdam
Netherlands
+31 10 408 1278 (Phone)
+31 10 408 9162 (Fax)

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