Does the capital of social capital matter? Relational resources of the board and the performance of Brazilian companies
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Based on theories of social capital, in this study, we seek to assess the impact of a board’s social capital on the market value of companies listed on the Brazilian stock exchange. As our indicator of social capital, we use the relational resources identified in the direct, indirect and heterogeneous ties of the board. Employing panel data from 508 observations, our results indicate that heterogeneous relational resources have a stronger and more significant influence than the resources available from board members’ direct relationships. Additionally, as the effects of board interlock are endogenously determined by several factors related to the firm level, we seek to mitigate the endogeneity problem using models of instrumental variables and simultaneous equations. Our hypotheses were consistent after controlling for endogeneity. We also check whether the board’s social capital could present a U-inverted effect on the market value. This relationship was only plausible in social capital by indirect ties. Finally, we isolate the effect of relational resources within and between industries on Tobin’s Q. There was no significant effect through interlocks within the same industry. However, ties with companies in several other industries were significant.
KeywordsSocial capital Board interlock Social networks analysis Performance Market value Endogeneity
The authors would like to thank CNPq (Grants 307932/2013-3, 471930/2014-8 and 301513/2016-3) and FAPERJ for financial support (Grant E-26/201.528/2014). Thanks also to Editor-in-chief Lino Cinquini for the dedication into the development of this paper, to Delci Grapegia Dal Vesco for help with endogeneity in panel data models and to the four anonymous reviewers for valuable comments.
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