Journal Article

The Impact of Directors' External Connections on Firm Performance: An Empirical Analysis

Kim, Sehan

2018

Overview

The paper examines whether and how directors ' external connections affect the operating performance of the firm for which they are board members. Using a large sample of directors and senior level executives, I map the social network of directors and executives, and construct a measure of directors ' external connections capturing how connected an individual director is to directors and executives of other firms. I find a positive association between the extent of directors ' external connections and firm performance. In addition, I find that firms experience efficiency gains through cost reductions in the presence of wellconnected directors. Overall, my findings suggest that directors ' external connections provide economic benefits to firms by increasing sales growth, lowering production costs, and improving firm profitability.

• Publisher: North American Business Press
• Subject: Boards of directors / Chief executive officers / Corporate governance / Costs / Efficiency / Financial performance / Human capital / Production costs / Social networks / Wireless networks