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Board-CEO friendship ties and firm value: Evidence from US firms

Fan, Yaoyao, Boateng, Agyenim, King, Timothy, MacRae, Claire (2019) Board-CEO friendship ties and firm value: Evidence from US firms. International Review of Financial Analysis, 65 . p. 101373. ISSN 1057-5219. (doi:10.1016/j.irfa.2019.101373) (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided)

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Abstract

This study examines the impact of board-CEO friendship ties on firm value and explores potential channels through which changes in firm value may be conveyed, based on a sample of 1696 publicly listed firms in U.S. over the period of 2000–2014. The study reveals that board-CEO friendship ties have a negative and economically meaningful impact on firm value, as measured by Tobin's Q and Total Q. Regarding potential channels of firm value, we show that the negative influence of board-CEO friendship ties on firm value is reduced in firms with greater board advising requirements but intensified in firms with higher board monitoring needs. We also find social ties tend to destroy firm value whereas professional ties do not. Our results are robust to endogeneity concerns, and after controlling for board-CEO professional ties.

Item Type: Article
DOI/Identification number: 10.1016/j.irfa.2019.101373
Uncontrolled keywords: Board-CEO friendship ties, Firm value, Agency theory, Directors
Subjects: H Social Sciences > HG Finance
Divisions: Faculties > Social Sciences > Kent Business School
Depositing User: Timothy King
Date Deposited: 09 Jul 2019 10:53 UTC
Last Modified: 11 Sep 2019 12:53 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/75266 (The current URI for this page, for reference purposes)
King, Timothy: https://orcid.org/0000-0002-7326-2162
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