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Publications
Publications
  • 2013
  • Article
  • Journal of Accounting & Economics

Boardroom Centrality and Firm Performance

By: David F. Larcker, Eric C. So and Charles C.Y. Wang
  • Format:Print
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Abstract

Firms with central or well-connected boards of directors earn superior risk-adjusted stock returns. Initiating a long position in the most central firms and a short position in the least central firms earns an average risk-adjusted return of 4.68% per year. Firms with central boards also experience higher future growth in return-on-assets (ROA) with analysts failing to fully reflect this information in their earnings forecasts. Return prediction, growth in ROA, and analyst forecast errors are concentrated among firms with high growth opportunities or firms confronting adverse circumstances, consistent with boardroom connections mattering most for firms that stand to benefit most from the information communicated and resources exchanged through the network of board members. Overall, our results suggest that board of director networks provide economic benefits that are not immediately reflected in stock prices.

Keywords

Networks; Governing And Advisory Boards; Forecasting And Prediction; Performance

Citation

Larcker, David F., Eric C. So, and Charles C.Y. Wang. "Boardroom Centrality and Firm Performance." Journal of Accounting & Economics 55, nos. 2-3 (April–May 2013): 225–250.
  • SSRN
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About The Author

Charles C.Y. Wang

Accounting and Management
→More Publications

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More from the Authors
  • The Sustainable Corporate Governance Initiative in Europe By: Mark Roe, Holger Spamann, Jesse M. Fried and Charles C.Y. Wang
  • The EU's Unsustainable Approach to Stakeholder Capitalism By: Jesse M. Fried and Charles C.Y. Wang
  • Connecting Expected Stock Returns to Accounting Valuation Multiples: A Primer By: Akash Chattopadhyay, Matthew R. Lyle and Charles C.Y. Wang
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