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Track M5-4: Boards, Governance, and Institutional Investors
Time:
Monday, 20/May/2024:
11:30am - 12:15pm
Session Chair: Tracy Yue Wang, University of Minnesota Discussant: Jiekun Huang, University of Illinois at Urbana-Champaign
Location:Room 501
Presentations
Do Board Connections between Product Market Peers Impede Competition?
Radha Gopalan1, Renping Li1, Alminas Zaldokas2
1Washington University in St. Louis; 2National University of Singapore
A firm's gross margin increases by 0.8 p.p. after forming a new direct board connection to a product market peer. Gross margin also rises by 0.4 p.p. after a connection is formed to a peer indirectly through a third intermediate firm. Further, using barcode-level data of 2.7 million products, we show that new board connections are related to higher consumer good prices and a greater tendency for market allocation. The effects are stronger when the newly connected peers share corporate customers or have similar business descriptions and hold when controlling for other inter-firm relationships.
