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Does Board Overlap Promote Coordination Between Firms?

Author

Listed:
  • Heng Geng

    (Victoria University of Wellington)

  • Harald Hau

    (University of Geneva - Geneva Finance Research Institute (GFRI); Swiss Finance Institute; Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute))

  • Roni Michaely

    (The University of Hong Kong; ECGI)

  • Binh Nguyen

    (Victoria University of Wellington - Victoria University of Wellington, Students)

Abstract

We investigate how board overlap affects coordination and performance among public firms. Our identification exploits the staggered introduction of Corporate OpportunityWaivers (COWs) in nine U.S. states since 2000. By reducing legal risk to directors serving on multiple boards, the COW legislation increased intra-industry board overlap for those firms that benefit most from the information flow facilitated by board overlap. We find that more board overlap improves firm profitability but also reduces investment, product overlap, and innovation. Our findings support the notion that board overlap curtails firm rivalry.

Suggested Citation

  • Heng Geng & Harald Hau & Roni Michaely & Binh Nguyen, 2021. "Does Board Overlap Promote Coordination Between Firms?," Swiss Finance Institute Research Paper Series 21-79, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp2179
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    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3973387
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    Cited by:

    1. Fu, Zheng & Ma, Yechi & Li, Suyang & Qiao, Lu, 2023. "Peer performance and the asymmetric timeliness of earnings recognition," International Review of Financial Analysis, Elsevier, vol. 85(C).

    More about this item

    Keywords

    Board overlap; corporate opportunity waivers; firm coordination; market power;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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