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Do board interlocks support monitoring effectiveness?

Author

Listed:
  • Franziska Handschumacher
  • Maximilian Behrmann
  • Willi Ceschinski
  • Remmer Sassen

Abstract

Purpose - This paper aims to investigate the relationship between board interlocks and monitoring effectiveness for listed German companies in a context of risk governance. While agency-theory and resource-dependence-theory suggest a positive association between board interlocks and monitoring effectiveness, reasons such as limited temporal resources of busy board members may suggest a negative association. Design/methodology/approach - By using panel data regression, the authors examined the association between board interlocks and monitoring effectiveness, which was approximated by excessive management compensation, pay-for-performance-sensitivity and CEO turnover-performance-sensitivity. The data set comprises 3,998 directorships for 132 listed German companies covering the period 2015-2017. Findings - The authors find that board interlocks are associated with not only a more excessive management pay and less performance-sensitive turnover but also a higher pay-for-performance-sensitivity. Originality/value - The study examines the impact of multiple directorships based on a German panel data set that includes both multiple appointments of members to national supervisory boards and all other appointments to national and international executive and supervisory bodies. The authors compile three measures to operationalize monitoring effectiveness.

Suggested Citation

  • Franziska Handschumacher & Maximilian Behrmann & Willi Ceschinski & Remmer Sassen, 2019. "Do board interlocks support monitoring effectiveness?," Management Research Review, Emerald Group Publishing Limited, vol. 42(11), pages 1278-1296, October.
    • Handle: RePEc:eme:mrrpps:mrr-11-2018-0434
    DOI: 10.1108/MRR-11-2018-0434
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    Citations

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    Cited by:

    1. Anup Banerjee & Mattias Nordqvist & Karin Hellerstedt, 2020. "The role of the board chair—A literature review and suggestions for future research," Corporate Governance: An International Review, Wiley Blackwell, vol. 28(6), pages 372-405, November.
    2. Claire E. F. Wright, 2022. "Above board? Interlocking directorates and corporate contagion in 1980s Australia," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 62(3), pages 290-312, November.
    3. Andersen, Angela & Garel, Alexandre & Gilbert, Aaron & Tourani-Rad, Alireza, 2022. "Social capital, human capital, and board appointments," Global Finance Journal, Elsevier, vol. 54(C).

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