Social network impact on corporate performance and governance

Motivated by the centrality measures constructed in Larcker, So and Wang (2013), I affirm that board connectedness positively affect firm performance in Singapore, and even if we were to measure firm performance by Tobin's Q. The impact on firm performance persists over at least four years. Con...

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Main Author: KHOO, Jonathan Chew Hoe
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Language:English
Published: Institutional Knowledge at Singapore Management University 2017
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SGX
Online Access:https://ink.library.smu.edu.sg/etd_coll_all/30
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1024&context=etd_coll_all
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spelling sg-smu-ink.etd_coll_all-10242017-10-24T05:51:53Z Social network impact on corporate performance and governance KHOO, Jonathan Chew Hoe Motivated by the centrality measures constructed in Larcker, So and Wang (2013), I affirm that board connectedness positively affect firm performance in Singapore, and even if we were to measure firm performance by Tobin's Q. The impact on firm performance persists over at least four years. Controlling for Corporate Governance using a proprietary database, the Singapore Corporate Governance Index, only the Eigenvector centrality under simple-weighted and hyperbolic-weighted projections survives the robustness test, suggesting that firstly, the local proxy of Corporate Governance based on OECD principles possibly controls for what is proxied by the Betweenness, Closeness and Degree centrality measures, and secondly, there is a strong case not to ignore multiple ties when projecting interlocking boards. The jury is hung on which weighting method is superior – the hyperbolic weighted projection has stronger results for return-onassets while the simple weighted method has stronger results for Tobin's Q. These results collectively provide additional support that some Corporate Governance indices may already impute the effects of connected boards to a certain extent. Using the methods for measuring social networks in interlocking boards as a basis, I extend the methodology to the space of ownership networks, a new endeavor since it considers the network distribution and connectedness of firm ownership, rather than focusing solely on the ultimate owners as has been the norm in the existing literature. Contrary to initial expectations, I find that simple methods, disregarding the directedness of the ownership linkages, are sufficient to yield strong results. This paper is the first to document that ownership centrality has a direct impact on corporate performance. Controlling for Corporate Governance using the Singapore Corporate Governance Index, I find that the results for Tobin's Q are fully explained away. However, the results for return-on-assets remain mostly undiluted, with Degree and Eigenvector more significant for the unity-weighted network, and Betweenness and Closeness more significant for the stake-weighted network, making the N-score composite centrality measure a suitable compromise. Composite centrality shows significant influence on firm return-on-assets in the short to medium term. 2017-07-01T07:00:00Z text application/pdf https://ink.library.smu.edu.sg/etd_coll_all/30 https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1024&context=etd_coll_all http://creativecommons.org/licenses/by-nc-nd/4.0/ Dissertations and Theses Collection eng Institutional Knowledge at Singapore Management University Social Network Ownership Centrality Corporate Ownership Board Centrality Interlocking Directorates Corporate Governance Singapore Corporate Governance Index SGX Singapore Business and Corporate Communications Corporate Finance Social Media
institution Singapore Management University
building SMU Libraries
continent Asia
country Singapore
Singapore
content_provider SMU Libraries
collection InK@SMU
language English
topic Social Network
Ownership Centrality
Corporate Ownership
Board Centrality
Interlocking Directorates
Corporate Governance
Singapore Corporate Governance Index
SGX
Singapore
Business and Corporate Communications
Corporate Finance
Social Media
spellingShingle Social Network
Ownership Centrality
Corporate Ownership
Board Centrality
Interlocking Directorates
Corporate Governance
Singapore Corporate Governance Index
SGX
Singapore
Business and Corporate Communications
Corporate Finance
Social Media
KHOO, Jonathan Chew Hoe
Social network impact on corporate performance and governance
description Motivated by the centrality measures constructed in Larcker, So and Wang (2013), I affirm that board connectedness positively affect firm performance in Singapore, and even if we were to measure firm performance by Tobin's Q. The impact on firm performance persists over at least four years. Controlling for Corporate Governance using a proprietary database, the Singapore Corporate Governance Index, only the Eigenvector centrality under simple-weighted and hyperbolic-weighted projections survives the robustness test, suggesting that firstly, the local proxy of Corporate Governance based on OECD principles possibly controls for what is proxied by the Betweenness, Closeness and Degree centrality measures, and secondly, there is a strong case not to ignore multiple ties when projecting interlocking boards. The jury is hung on which weighting method is superior – the hyperbolic weighted projection has stronger results for return-onassets while the simple weighted method has stronger results for Tobin's Q. These results collectively provide additional support that some Corporate Governance indices may already impute the effects of connected boards to a certain extent. Using the methods for measuring social networks in interlocking boards as a basis, I extend the methodology to the space of ownership networks, a new endeavor since it considers the network distribution and connectedness of firm ownership, rather than focusing solely on the ultimate owners as has been the norm in the existing literature. Contrary to initial expectations, I find that simple methods, disregarding the directedness of the ownership linkages, are sufficient to yield strong results. This paper is the first to document that ownership centrality has a direct impact on corporate performance. Controlling for Corporate Governance using the Singapore Corporate Governance Index, I find that the results for Tobin's Q are fully explained away. However, the results for return-on-assets remain mostly undiluted, with Degree and Eigenvector more significant for the unity-weighted network, and Betweenness and Closeness more significant for the stake-weighted network, making the N-score composite centrality measure a suitable compromise. Composite centrality shows significant influence on firm return-on-assets in the short to medium term.
format text
author KHOO, Jonathan Chew Hoe
author_facet KHOO, Jonathan Chew Hoe
author_sort KHOO, Jonathan Chew Hoe
title Social network impact on corporate performance and governance
title_short Social network impact on corporate performance and governance
title_full Social network impact on corporate performance and governance
title_fullStr Social network impact on corporate performance and governance
title_full_unstemmed Social network impact on corporate performance and governance
title_sort social network impact on corporate performance and governance
publisher Institutional Knowledge at Singapore Management University
publishDate 2017
url https://ink.library.smu.edu.sg/etd_coll_all/30
https://ink.library.smu.edu.sg/cgi/viewcontent.cgi?article=1024&context=etd_coll_all
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