The Network Of Interlocking Directorates And Firm Performance In Transition Economies: Evidence From China
Authors: Li Liuchuang , Tian Gaoliang , Yan Wenjia 
Published: February 2016

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 36.1pt 0pt 0.5in; text-align: justify; text-justify: inter-ideograph; mso-pagination: none; mso-outline-level: 1;" class="MsoNormal"><span style="font-family: Times New Roman;"><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">Using </span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">a Chinese sample containing 8727 firm-years over the period from 2005 to 2010, we investigate the economic effect of interlocking directorate networks, and find that firms with central position</span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;"> measured by network centrality</span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;"> in interlocking directorate networks earn superior one</span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">-</span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;"> to three</span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">-</span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">year ahead performance measured by return on assets (ROA) and return on Sales (ROS). We also show that the economic effect of interlocking directorate network is more pronounced in non-state-owned enterprises (NSOEs) compared to state-owned enterprises (SOEs). Our evidence is important, because it shows that </span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">to some extent</span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;"> </span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">the </span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">interlocking directorate network can </span><span style="font-size: 10pt; mso-fareast-font-family: SimSun; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">serve </span><span style="font-size: 10pt; mso-fareast-language: ZH-CN; mso-font-kerning: 22.0pt; mso-bidi-font-weight: bold;">as an solution to the institutional voids which are derived from the reform in Chinese translation economy. </span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>