Revisiting the link between board social capital and firm performance: the role of informal institutions

Gunn, Douglas (2022) Revisiting the link between board social capital and firm performance: the role of informal institutions. PhD thesis, University of Glasgow.

Abstract

Board social capital concerns the connections directors have with others. Scholars have often sought to analyse the relationship between board social capital and firm performance, yet the extant literature is both inconclusive and under contextualised. Drawing on the concepts of informal institutions and social norms, I investigate how the effect of board social capital on performance is dependent on the firm’s external environment.

In a cross-national sample of firms, study 1 explores how country-level generalised trust and countrylevel corruption interact with the relationship between board social capital and firm performance. Data on the board of directors was collected from BoardEx and matched with financial data from Datastream. Longitudinal data was gathered for 7,479 firms across 57 countries. Using panel data analysis, I find that board social capital has a positive effect on firm performance. Importantly, the results also shows that when firms are located in high trust countries, investor reliance on firm-specific signals of legitimacy, like board social capital, are reduced. This demonstrates that board social capital is most important for firms in countries with low levels of generalised trust. Conversely, I do not find a significant interaction effect of corruption on the relationship between board social capital and firm performance. This suggests country-level corruption does not have a bearing on the effect of board social capital. Study 2 investigates the interaction effect of county-level religiosity on the relationship between board social capital and firm performance in a sub-sample of United States firms. Using panel data analysis, I find that board social capital has a positive impact on performance for firms in the United States. In my main results, I find religiosity does not interact with the relationship between board social capital firm performance. This suggests that board social capital has a positive effect on firm performance in the United States irrespective of county-level religiosity.

These findings deepen our understanding of corporate governance by demonstrating the conditions under which board social capital is most important. The results show that firms should take into account certain informal institutions when considering board composition. When firms are headquartered in countries with low levels of generalised trust, they should recognise the increased importance of hiring directors with greater levels social capital.

• Item Type: Thesis (PhD)
• Qualification Level: Doctoral
• Subjects: H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
• Colleges/Schools: College of Social Sciences > Adam Smith Business School > Management
• Supervisor's Name: Dudau, Dr. Adina, Tsalavoutas, Professor Yannis and Kominis, Dr. Georgios
• Date of Award: 2022
• Depositing User: Theses Team
• Unique ID: glathesis:2022-82834
• Copyright: Copyright of this thesis is held by the author.
• Date Deposited: 29 Apr 2022 07:53
• Last Modified: 29 Apr 2022 07:56
• Thesis DOI: 10.5525/gla.thesis.82834
• URI: https://theses.gla.ac.uk/id/eprint/82834