JOB MARKET PAPER This paper identifies the effect of corporate networks on firms ’ financial investment and executive pay decisions. Corporate networks arise through board interlocks, which provide a frequent and important channel for non-market interactions amongst firms. Using panel data for all publicly traded companies in India I estimate peer effects in firm policies, defining each firm’s reference group as the set of all other firms with whom it shares one or more directors. Identification of dynamic network peer effects, which derive from endogenous associations, is achieved by exploiting natural breaks in network evolution that exogenously change the composition of peers. These breaks occur as a result of local network shocks – death or retirement of shared directors – that are stochastic and external to the network formation process. I find significant network peer effects that are positively associated with firms ’ investment strategy and executive compensation. I also explore heterogeneity in peer effects by distinguishing between network peers who belong to the same industry from those that do not, and find a greater effect of across-industry network peers.

Abstract This paper studies how directors'reputational concerns a¤ect board structure, corporate governance, and …rm value. In our setting, directors a¤ect their …rms'governance, and governance, in turn, a¤ects …rms' demand for new directors. Whether the labor market rewards a shareholder-friendly or management-friendly reputation is determined in equilibrium and depends on aggregate governance. We show that directors'desire to be invited to other boards creates strategic complementarity of corporate governance across …rms. Directors' reputational concerns amplify the governance system: strong systems become stronger and weak systems become weaker. We derive implications for multiple directorships, board size, transparency, and board independence.

Social Network Analysis (SNA) is an emerging research field in finance, above all in Brazil. This work is pioneering in that it is supported by reference to different areas of knowledge: social network analysis and corporate governance, for dealing with a similarly emerging topic in finance; interlocking boards, the purpose being to check the validity of the small-world model in the Brazilian capital market, and the existence of associations between the positioning of the firm in the network of corporate relationships and its worth. To do so official data relating to more than 400 companies listed in Brazil between 1997 and 2007 were used. The main results obtained suggest that the configuration of the networks of relationships between board members and companies reflects the small-world model. Furthermore, there seems to be a significant relationship between the firm’s centrality and its worth, described according to an “inverted U ” curve, which suggests the existence of optimum values of social prominence in the corporate network.

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it pay to have friends?

Can institutional investors generate sufficient power through collective action to drive improvements in governance? We use proprietary data on the private communications of a formal coalition of Canadian institutional investors and find that its private engagements influenced firms ’ adoption of majority voting and say-on-pay advisory votes, improved compensation structure and disclosure, and influenced CEO incentive intensity. Spillovers to non-engaged firms occur through board interlocks and to firms in which the CCGG is expected to be more powerful in a voting contest. This form of activism is both a substitute and complement to other interventions to address governance concerns.

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