Boardroom centrality and firm performance

Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast errors...

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Bibliographic Details
Published inJournal of accounting & economics Vol. 55; no. 2-3; pp. 225 - 250
Main Authors Larcker, David F., So, Eric C., Wang, Charles C.Y.
Format Journal Article
LanguageEnglish
Published Amsterdam Elsevier B.V 01.04.2013
Elsevier Sequoia S.A
Subjects
Analyst forecasts
Board of director networks
Board of directors
Boards of directors
Business forecasts
Business growth
Business networks
Centralization
Market efficiency
Measurement errors
Organizational effectiveness
Return on assets
Stock prices
Stock returns
Studies
Market efficiency
G14
Board of director networks
G3
L14
Analyst forecasts
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Summary:Firms with central boards of directors earn superior risk-adjusted stock returns. A long (short) position in the most (least) central firms earns average annual returns of 4.68%. Firms with central boards also experience higher future return-on-assets growth and more positive analyst forecast errors. Return prediction, return-on-assets growth, and analyst errors are concentrated among high growth opportunity firms or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms standing to benefit most from information and resources exchanged through boardroom networks. Overall, our results suggest that director networks provide economic benefits that are not immediately reflected in stock prices.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0165-4101
1879-1980
DOI:10.1016/j.jacceco.2013.01.006