Interlocking Directorates and Business Groups: Belgian Evidence

Review of Managerial Science, 2019

This study investigates how interlocking directorates affect dynamic corporate performance among 187 Taiwanese electronics companies during a 3 year sampling period (2013-2015). This study consists of two stages. First, this study measures the operational efficiency of electronics companies using the dynamic slacks-based measure model of data envelopment analysis. Second, this study adopts a truncatedregression model with bootstrap to examine the impacts of interlocking directorates on dynamic corporate performance. The empirical findings of this study indicate that centrality (direct connections), structural holes (indirect connections), and the number of connections (total connections) related to interlocking directorates have significant positive influences on the dynamic corporate performance of Taiwanese electronics companies. The results suggest that more interlocks at the board level leads to better corporate performance over a long-term period. Overall, this study uses social network analysis to shed light on the role of interlocking directorates and its importance to dynamic corporate performance from the resource dependence perspective.

Business History Review, 1971

An examination of interlocking directorates in major American businesses since 1896 indicates that the incidence of interlocking has declined considerably in this century.

Economy and Society, 2004

Recent discussion on German corporate governance is empirically inconclusive as to whether institutional change has been strong enough to speak of convergence tendencies towards the Anglo-Saxon outsider system. This article adds to this debate in two ways. First, structural changes in the network of interlocking directorates of large German corporations are examined from a longitudinal perspective. There is considerable continuity of structural network features on the meso-and macro-level between 1989 and 2001. Quantitative dilution of the network has not been translated into a process of structural erosion. Second, the German market for corporate control is found underdeveloped over time, because three-quarters of public takeover bids are tendered to consolidate already existing controlling stockholdings, and no critical mass of companies exists for trade in this market. It is concluded that current institutional change should not be interpreted as system change or convergence towards the Anglo-Saxon model of corporate governance.

Cuadernos de Gestión, 2015

The aim of this paper is to determine to what extent globalization pressures are changing interlocking directorate networks modeled on continental capitalism into Anglo-Saxon models. For this purpose we analyse the Spanish network of interlocks, comparing the present structure (2012) with that of 1993 and 2006. We show how, although Spanish corporative structure continues to display characteristics of the continental economies, some major banks are significantly reducing industrial activity. Nevertheless, the financial organizations continue to maintain a close relationship with sectors such as construction and services. The analysis of the network of directorates shows a retreat in activity of industrial banking in Spain. Two large Spanish financial institutions, BSCH and La Caixa, continue to undertake activities of industrial banking in 2006, but this activity is significantly reduced in 2012. According to the theories on the role of the interlocking directorates, the companies in these sectors assure their access to banking credit by incorporating advisors from financial organizations to their board of directors. We cannot conclude that the structure of the Spanish corporate network has become a new case of Anglo-Saxon structure, but we got indications that are becoming less hierarchic as banks seem to slowly abandon centrality positions. This is especially salient if we compare the networks of 2006 and 2012, which show a continuing decrease of the role of banks and insurance companies in the network.

Corporate Governance: An International Review, 2008

It is fairly well established that business group affiliation can compensate for relatively weak institutions in emerging markets, and in Japan. However, business groups are also common in the EU, and there have not yet been any studies of business group affiliation and firm performance in the EU. Consequently, we investigate how business group affiliation affects firm performance in Belgium. Research Findings/Insights: We find that operating profitability of group companies is significantly lower than that of stand-alone companies, while group companies have more volatile profits than stand-alone companies. Operating profitability of group companies does not depend on the extent of group diversification. Internal capital markets transfer funds from good performers to poorly performing group companies. The impact of group affiliation on profitability does not depend on group age or group ownership. Theoretical Implications: Our study is, to the best of our knowledge, the first to investigate how affiliation with a business group affects company performance in a developed country other than Japan. The results raise the question why business groups endure in so many developed countries with good investor protection and well-developed capital markets. Some explanations proposed in the literature are not confirmed. Practical Implications: Our study offers insights to policy makers and practitioners on the value and the role of business groups in developed countries. The results raise doubts about the value of these groups in such countries and suggest that policy makers may want to consider dismantling business groups in EU countries.

Handbook of the International Political Economy of the Corporation, 2018

This chapter provides an introduction to the literature on interlocking directorates and corporate networks. It first traces the historical roots of the field back to the early 20th century, when researchers on both sides of the Atlantic started expressing concern about the threat to democratic process posed by the emergent corporate form, the potential for collusion allowed by the growing practice of interlocking directorate, and the general concentration of power in the hands of large firms and banks. It then outlines the major theoretical approaches employed, that focus on the corporate network as a set of both interorganizational and interindividual relationships. Third, it summarizes the main findings on the cohesiveness of the corporate community, the hegemonic position of banks, and historical changes and longitudinal dynamics of the network. Finally, it discusses most recent debates on the globalization, the emergence of a European corporate network, and the decline and recomposition of the corporate community.

2009

Abstract The purpose of this paper is to contribute to the literature on director interlocks by illustrating and analysing the interlocking directorships among the Italian, French, German, UK and US listed Blue Chips. The comparison of the five countries considered shows that two national models stand out. On the one hand a model made of a high number of companies linked to each other through a small number of shared directors who serve on several company boards at the time (France, Germany, and Italy).

The purpose of this paper is to contribute to the literature on director interlocks by illustrating and analysing the interlocking directorships among the Italian, French, German, UK and US listed Blue Chips. The comparison of the five countries considered shows that two national models stand out. On the one hand a model made of a high number of companies linked to each other through a small number of shared directors who serve on several company boards at the time (France, Germany, and Italy). On the other hand, in the UK much fewer companies are connected to each other essentially through directors who have no more than two board positions at the time. A case in between is represented by the US, where a high number of companies are connected to each other just like Germany, France, and Italy. However, just like the UK, such connections are made through directors who tend to have just two board positions at the time, a sign that, differently from Italy, Germany, and France, the UK and US networks might not be functional to systemic collusion.

SSRN Electronic Journal, 2013

We explore the nature of Business Groups, that is network-like forms of hierarchical organization between legally autonomous …rms spanning both within and across national borders. Exploiting a unique dataset of 270,474 headquarters controlling more than 1,500,000 (domestic and foreign) a¢ liates in all countries worldwide, we …nd that business groups account for a signi…cant part of value-added generation in both developed and developing countries, with a prevalence in the latter. In order to characterize their boundaries, we distinguish between an a¢ liate vs. a group-level index of vertical integration, as well as an entropy-like metric able to summarize the hierarchical complexity of a group and its trade-o¤ between exploitation of knowledge as an input across the hierarchy and the associated communication costs. We relate these metrics to host country institutional characteristics, as well as to the performance of a¢ liates across business groups. Conditional on institutional quality, a negative correlation exists between vertical integration and hierarchical complexity in de…ning the boundaries of business groups. We also …nd a robust (albeit non-linear) positive relationship between a group's hierarchical complexity and productivity which dominates the already known correlation between vertical integration and productivity. Results are in line with the theoretical framework of knowledge-based hierarchies developed by the literature, in which intangible assets are a complementary input in the production processes.

2010

This study was carried out to apply regression analysis in the prediction of corporate performance in Malaysia. Its focus is on one of the corporate governance issues which is on interlocking directorship. This study is to appraise whether the interlocking directorship and other factors like turnover, quick ratio and total debt to equity ratio can be good predictors for corporate performance. This study defines interlocking directorship as a situation where directors (executive or non-executive) sit on more than one board. There are top 100 companies listed under FTSE Bursa Malaysia Top 100 Index designated as samples in this study. Using two measures of corporate performance; earning per share (EPS) and return on equity (ROE). Two regression models have been developed in this study. Results show no significant relationship between both corporate performance measures EPS and ROE and interlocking directorship. This seems to suggest that the interlocking directorships in Malaysian fir...