Essays on director interlocks and board homophily

Abstract

The corporate sector in emerging economies is often characterised by concentrated ownership and control structures. Corporate governance regulations in these economies are still evolving and the market for corporate control is relatively weak compared to developed economies. Under these circumstances the board of directors has a pivotal role of providing strategic guidance and access to resources which help firms to grow and function efficiently. The other role of board is the usual fiduciary duty towards the shareholders of the firm. This thesis focuses on the former function of board and aims to empirically contribute towards the understanding of resource provisioning role of the board. In particular, the thesis emphasises on the importance of directorial ties and strength of ties i.e. director interlocks, and its relation with firm outcomes in the context of an emerging market economy like India by analysing a sample of publicly listed firms in the country. newline newlineThe first essay on Do Director Interlocks and Board Network Matter for Firm Performance? studies the association between director interlock phenomenon and firm performance in accordance to resource dependence theory. We find a positive association between board network formed on account of director interlocks and firm performance. The more central position of a firm within the network reflects greater accessibility of information and resources within network which is beneficial for performance. The board network appears to be more important for larger firms in the sample. It suggests that network can provide access to non-market information which can be important for their further growth, help in gaining legitimacy and handling uncertainty in the external environment. The positive relation is stronger for firms involved in research and development activities since network can facilitate knowledge sharing among firms. Also, the board network is more important for older firms. It is likely that the board network provides information about modern techniques