They would like to thank Peter Cappelli, John Core, Jerry Davis, Bruce Kogut, David Larcker, Mark Newman, Scott Richardson, Lori Rosenkopf, Irem Tuna, Duncan Watts, Marco J. van der Leij and seminar participants at Manchester University, Singapore Management University, and IESE Business School, Barcelona for comments and discussions during the preparation of this paper. They are grateful to Lerong He for research assistance and to the Reginald Jones Center of the Wharton School for financial support. Finally, they would like to thank Jarkko Hietaniemi and Mats Kindahl, authors of the perl modules Graphand Math::Polynomial, whose excellent freeware made the authors' work much easier.
The Small World of Corporate Boards
Article first published online: 27 SEP 2006
Journal of Business Finance & Accounting
Volume 33, Issue 9-10, pages 1321–1343, November/December 2006
How to Cite
Conyon, M. J. and Muldoon, M. R. (2006), The Small World of Corporate Boards. Journal of Business Finance & Accounting, 33: 1321–1343. doi: 10.1111/j.1468-5957.2006.00634.x
- Issue published online: 2 NOV 2006
- Article first published online: 27 SEP 2006
- (Paper received February 2006, revised version accepted April 2006. Online publication September 2006)
- boards of directors;
- small worlds;
- corporate governance
Abstract: We demonstrate the importance of graph theory for understanding boards of directors. Specifically, we focus on the ‘small world’ phenomenon. Our empirical results show that a random graph model is remarkably good at explaining board structure and connectedness in the United States, the United Kingdom and Germany. Although there are small-world traits such as ‘clustering’ and ‘short-paths’ in the corporate world, they are no more pronounced than would be expected by chance in a statistically similar, but randomly assembled corporate universe. In short, boards of directors, especially in the United States, are no more ‘clubby’ than expected. Finally, our results show the existence of positive degree correlation: directors who sit on many boards do so in the company of other directors who sit on many boards. Board members whose services are in high demand, serve on boards with similar directors.