Antecedents and Consequences of Board Interlocks: Evidence from The Ghana Stock Exchange

ABSTRACT

This study investigates the antecedents and consequences of board interlocks on the Ghana Stock Exchange. The study looks at how factors such as the auditor network, industry network, foreign or local ownership network, gender effect, age effect, gender homophile and age homophile could influence the formation of interlocks between firms. The study also examined the relation between interlocks and Return on Assets, Return on Equity and Profitability among the firms. Data for the study was based on a five-year panel data covering 2005 to 2009 on 35 listed companies on the Ghana Stock Exchange. The data was transformed from a bipartite to a co-affiliations data using the Bonacich transformation approach.

The estimation technique applied by the study is the Hubert and Mantel MR-QAP to perform logistic regression across the cells of the dependent and Independent matrices. The study found that auditor network, industry network and age homophily had significant effect on who is appointed as a board member by these firms. Also firms that shared common board members displayed similar performance patterns which was tested using the constant homophily, variable homophily and the structural block models. The study therefore recommends that policy makers should take a look at the influence the auditors are having on board interlocks and firms should appoint members who sit on boards of well performing firms