Locally-Rooted Directors

Kind, Axel; Volonté, Christophe

Locally-Rooted Directors

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Date

2018

Authors

Kind, Axel

Volonté, Christophe

Collections

Wirtschaftswissenschaften

Publication type

Contribution to a conference collection

Publication status

Published

Published in

EFMA 2018

Abstract

We study the influence of locally-rooted directors, i.e., board members with personal ties to a company’s geographic location, on firm performance. Locally-rooted directors may be elected for two contrasting reasons. First, they may provide important local know-how and business relations that can prove beneficial to a company. Second, they may be elected solely because of social ties with company insiders, such as fellow board directors, top executives, or large shareholders. In the latter case, locally-rooted directors may lack both relevant experience, business skills, and independence. We use the directors’ alma mater as a proxy for local roots. Almost 30% of all directors in our sample are locally-rooted. The empirical analysis indicates that locally-rooted directors are negatively related with Tobin’s Q, which suggests that they are chosen due to their social ties with insiders rather than because they add local business know-how. However, the negative relationship with Tobin’s Q is not present in domestically-oriented companies, i.e., firms without material foreign sales, and firms in regulated industries. Thus, the results do not rule out that, in some cases, the presence locally-rooted directors may be optimal.

Subject (DDC)

330 Economics

Conference

European Financial Management Association 2018 Annual Meetings : EFMA 2018, Jun 27, 2018 - Jun 30, 2018, Milan, Italy

Cite This

ISO 690

KIND, Axel, Christophe VOLONTÉ, 2018. Locally-Rooted Directors. European Financial Management Association 2018 Annual Meetings : EFMA 2018. Milan, Italy, Jun 27, 2018 - Jun 30, 2018. In: EFMA 2018

BibTex

@inproceedings{Kind2018Local-47809,
  year={2018},
  title={Locally-Rooted Directors},
  url={http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2018-Milan/papers/EFMA2018_0418_fullpaper.pdf},
  booktitle={EFMA 2018},
  author={Kind, Axel and Volonté, Christophe}
}

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URL of original publication

http://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2018-Milan/papers/EFMA2018_0418_fullpaper.pdf

Test date of URL

2019-12-03

Bibliography of Konstanz

Yes