Kiel Working Papers, Kiel Institute for World Economics
No 1446:
The Small Core of the German Corporate Board Network
Simone Alfarano, Thomas Lux and Mishael Milakovic
Abstract: We consider the current bipartite graph of German
corporate boards and identify a small core of directors who are highly
central in the entire network while being densely connected among
themselves. To identify the core, we compare the actual number of board
memberships to a random benchmark, focusing on deviations from the
benchmark that span several orders of magnitude. It seems that the board
appointment decisions of largely capitalized companies are the driving
force behind the existence of a core in Germany’s board and director
network. Conditional on being a board member, it is very improbable to
obtain a second membership, but multiple board membership becomes
increasingly likely once this initial barrier is overcome. We also present
a simple model that describes board appointment decisions as a trade-off
between social capital and monitoring ability
Keywords: Board and director interlocks, network core, network formation, market capitalization; (follow links to similar papers)
JEL-Codes: D85,; L20,; M14,; M51; (follow links to similar papers)
19 pages, September 2008
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