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Director networks and firm value

Author

Listed:
  • Bakke, Tor-Erik
  • Black, Jeffrey R.
  • Mahmudi, Hamed
  • Linn, Scott C.

Abstract

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.

Suggested Citation

  • Bakke, Tor-Erik & Black, Jeffrey R. & Mahmudi, Hamed & Linn, Scott C., 2024. "Director networks and firm value," Journal of Corporate Finance, Elsevier, vol. 85(C).
    • Handle: RePEc:eee:corfin:v:85:y:2024:i:c:s0929119924000075
    DOI: 10.1016/j.jcorpfin.2024.102545
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    More about this item

    Keywords

    Board of directors; Network centrality; Quasi-natural experiment; Firm value;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • D85 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Network Formation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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