Board Interlocking, Financial Performance and Value of Listed Companies in brazilian stocks: analysis in the Perspective of Graph Theory and Social Network

Wesley Mendes-Da-Silva (
Economics, Business and Accounting, University of São Paulo | USP
April, 2010
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Administrator and founding member of the Brazilian Society of Finances (SBFin), he possesses a doctorate in Administration from the University of São Paulo (USP) and a master’s degree in Administration from the Federal University of Pernambuco (UFPE). He is a career professor of the Department of Accounting, Finances and Control of the Business Administration School of the Getulio Vargas Foundation (FGV/EAESP). His research interests are targeted to themes associated with financial innovations.


Corporate governance is the realm of finance studies that has received growing attention from the academic community. In addition, when studying corporate governance, there is a phenomenon that has increasingly motivated research, the interlocking board - the fact that one or more individuals participate simultaneously in the board of directors of different companies, allowing the formation of corporate and personal networks, which create a flow of essential resources to the company, resources that can be negotiated, or not, in markets. The main objective of this thesis is to verify the existence of associations with firms positional aspects in the networks regarding their value and their financial performance, while it examines the structural evolution of corporate and personal networks. This study used a dataset of 452 companies listed in Brazilian stock market between 1997 and 2007, based on the graph theory and social networks approaches, using regressions analysis with panel data. The main results of this study suggest the existence of an intellectual elite who occupy the top management of listed companies. One consequence of this result is the understanding that the business environment follows the model of small-worlds, whereby the distance between the actors of a network tends to be small, and large group of participants from the local network, increasing the speed of communication between board members, and thus between the companies. Regarding the performance of the firm, the results suggest a significant quadratic relationship, such as inverted U, the centrality of the degree to Tobin's Q and the liquidity of the firm, indicating the existence of optimum values (with maximizes the value and corporate performance) for the centrality of the company, within the network of corporate relations.