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Director Interlocking and Firm Ownership: Longitudinal Studies of 1- and 3-Mode Network Dynamics
Stockholm University, Faculty of Social Sciences, Department of Sociology.
2010 (English)Doctoral thesis, comprehensive summary (Other academic)
Abstract [en]

This thesis is based on three empirical studies of the director interlock network among Swedish firms listed on the Stockholm Stock Exchange, focusing on its consequences for firm behavior and its association with ownership structures. Director interlocks are created when directors serve on, and hence interlock, several boards. Director interlocks aggregate to a social network that not only connects most firms into a single component, but are, more essentially, also shown to affect firm behavior. The introductory chapter contains a review of the director interlock research as well as some suggestions for future research directions.

Study I is an examination of the importance of director interlock relations for stock repurchases. Using parametric survival analysis, it is demonstrated that the decision to repurchase stocks is dependent on both the firms’ economic settings and their director interlocks.

Study II examines the network impact on recruitment of new board members in the network of firms, directors, and owners. Using simulations, it is shown that directors with personal contact with a director and/or owner of the recruiting firm have a substantially increased probability of being recruited to the focal board.

Study III examines the association between ownership and director interlocks. Re-analyses of the same network examined in Study II show that multiple director assignments are highly dependent on ownership interlocks.

The three studies exemplify the real-world consequences of board interlocks and field a new understanding of the mechanisms behind their formation. Furthermore, the association between the director and ownership interlocks suggests that the ownership network (co-)produces some of the phenomena that have been attributed to the director network. These results underscore the need for further examination of director interlocks to bring the owners back into the analysis.

Place, publisher, year, edition, pages
Stockholm: Acta Universitatis Stockholmiensis, 2010. , 155 p.
Series
Stockholm studies in sociology, ISSN 0491-0885 ; N.S., 41
Keyword [en]
Social network analysis, Director interlocks, Ownership, Corporate governance, 3-mode networks
National Category
Sociology
Research subject
Sociology
Identifiers
URN: urn:nbn:se:su:diva-36774ISBN: 978-91-86071-33-2 (print)OAI: oai:DiVA.org:su-36774DiVA: diva2:290406
Public defence
2010-03-26, Nordenskiöldsalen, Geovetenskapens hus, Svante Arrhenius väg 12, Stockholm, 10:00 (English)
Opponent
Supervisors
Note

At the time of the doctoral defense, the following papers were unpublished and had a status as follows: Paper 2: Manuscript. Paper 3: Manuscript.

Available from: 2010-03-04 Created: 2010-01-26 Last updated: 2012-10-05Bibliographically approved
List of papers
1. Economic Action and Interfirm Relations: Diffusion of Stock Repurchases on the Stockholm Stock Exchange 2000–2003
Open this publication in new window or tab >>Economic Action and Interfirm Relations: Diffusion of Stock Repurchases on the Stockholm Stock Exchange 2000–2003
2006 (English)In: European Sociological Review, ISSN 0266-7215, E-ISSN 1468-2672, Vol. 22, no 4, 383-396 p.Article in journal (Refereed) Published
Abstract [en]

This study examines the importance of interorganizational relations for stock repurchases made on the Stockholm Stock Exchange between 2000 and 2003. Building on theories of social influence, the main argument made is that stock repurchases are associated not only with specific economic characteristics of the repurchasing firms but also with social influence through board interlocks. The study makes use of parametric survival analysis and is performed on all firms listed on the Stockholm Stock Exchange in at least January and June in one of the examined years. The result suggests that the decision to repurchase stocks is dependent on both the firms’ economic settings and their social embeddedness in terms of board interlocks. The argument of social embeddedness holds true even when ownership interlocks are taken into consideration. This is particularly important because there seems to be some overlapping between the director and the ownership network, and controlling for ownership interlocks increases the credibility of the argument that stock repurchases made during the studied period were associated with social embeddedness in terms of board interlocks.

Keyword
Stock Repurchases, Interlocks, Interlocking directorates, Corporate governance
Identifiers
urn:nbn:se:su:diva-14541 (URN)doi:10.1093/esr/jcl003 (DOI)
Available from: 2008-10-07 Created: 2008-10-07 Last updated: 2017-12-13Bibliographically approved
2. Interlocking directorates and director recruitment: A longitudinal analysis of a 3-mode network
Open this publication in new window or tab >>Interlocking directorates and director recruitment: A longitudinal analysis of a 3-mode network
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper examines the network impact on recruitment of new board members. Analyzing a longitudinal 3-mode network, all recruitment done at firms listed on the Stockholm Stock Exchange between 1990-2005 is examined. It is shown that new board members tend to be recruited through already existent links in the interlocking directorship network, but also through the network of common ownership. This applies to directors that have personal contact with a director and/or owner of the recruiting firm. There is, however, no positive network effect for directors further removed from the recruiting firms, or being in close proximity to the recruiting boards’ chairmen. It is also shown that the benefit of personal contacts with the recruiting boards’ directors is substantial, potentially more than four times higher than would be expected if network distance were of no importance in the recruitment process.

Keyword
Social network analysis, Director interlocks, Director recruitment, Ownership, 3-mode networks
National Category
Sociology
Research subject
Sociology
Identifiers
urn:nbn:se:su:diva-36772 (URN)
Available from: 2010-01-26 Created: 2010-01-26 Last updated: 2010-01-27Bibliographically approved
3. Bringing the owners back in: An analysis of a 3-mode interlock network
Open this publication in new window or tab >>Bringing the owners back in: An analysis of a 3-mode interlock network
(English)Manuscript (preprint) (Other academic)
Abstract [en]

This paper examines the association between ownership and director inter-locks in Swedish big business between 1990-2005. By analyzes of the 3-mode network of owners, firms, and directors, it is showed that ownership and director interlocks are highly associated. Over the 16 years analyzed, up to 47.1% of all multiple director assignments are dependent on owner inter-locks, and the range is 0.307 (2001) to 0.471 (1991). Although still high, the association between ownership and directorship interlocks has decreased during the studied period. This is shown to be due to a decrease in the asso-ciation between ownership interlocks and director interlocks for directors without any CEO positions. For directors with at least one CEO position, the association between the interlock types is stable over the entire period. The findings provide a new understanding of the mechanisms behind the formation of director interlocks. Furthermore, the association between the interlock types suggests that the ownership network may potentially (co-)produce some of the phenomena that have been attributed to the director network. Future analyses of director interlocks have to bring the owners back in.

Keyword
Social network analysis, Director interlocks, Ownership structrures, Corporate governance, 3-mode networks
National Category
Sociology
Research subject
Sociology
Identifiers
urn:nbn:se:su:diva-36773 (URN)
Available from: 2010-01-26 Created: 2010-01-26 Last updated: 2010-02-04Bibliographically approved

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