Directors' Connections, Financial Resources and Performance: An In-Depth Analysis of Canadian Companies

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Provided by: Canadian Center of Science and Education
Topic: Enterprise Software
Format: PDF
Despite numerous papers, there is still no consensus about the impact of the board on firm performance. Previous paper has focused mainly on the economic and financial aspects of the director's role, but scant attention has been paid to its relational aspect. Some authors have suggested that directors' social networks (connections) could be used to help the firm acquire external resources. This paper delves into the impact of three types of director connections on the firm's resources and financial performance. Based on a random sample of Canadian firms, their results show that directors' economic and political connections have a positive and significant impact on firm debt and that each type of connection they have (economic, political and social) affects firm financial performance.
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