The Effect of Interlocking Directors Network on Firm Value and Performance: Evidence from Korean-Listed Firms

This study examines the impact of network of interlocking directors' network on firm value and performance using panel dataset drawn from 7307 firm-year observations during the period 2000-2014. We conduct social network analysis to analyze the interlocking directors' network and focus on how interlocking directors' network and existence of interlocking directors affect firm value and performance. We find that interlocking director network has significant and negative effects on firm values measured as Tobin's Q and performance measured as return of assets and total factor productivity. This result suggests that the interlocking directors maintain and use vested right to pursue their own interests. It is seen that this can be a chance to impose a symbolic meaning for what kind of effect the interlocking directors make on performance in the Korean-listed firms.