The Network Of Interlocking Directorates And Firm Performance In Transition Economies: Evidence From China

Main Article Content

Liuchuang Li
Gaoliang Tian
Wenjia Yan

Keywords

Institutional Voids, Interlocking Directorates, Centrality, Performance

Abstract

Using 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 measured by network centrality in interlocking directorate networks earn superior one- to three-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 to some extent the interlocking directorate network can serve as an solution to the institutional voids which are derived from the reform in Chinese translation economy.

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