Title: Investors' knowledge and interlocking directorship: the domino effect of media news on corporate performance

Authors: Vincenzo Farina; Lucrezia Fattobene; Elvira Anna Graziano

Addresses: Department of Management and Law, University of Rome Tor Vergata, Rome, Italy ' School of Economics, LUM Jean Monnet University, Bari, Italy ' Financial Markets and Institutions, Link Campus University, Rome, Italy

Abstract: Owing to social structures that promote different types of connections, including investments and vertical relationships, boards of directors of international large companies often have some directors in sharing. Managing these complex relationships is very relevant both in terms of Human Resource Management (HRM) and knowledge management. Investors' knowledge is usually influenced by the news on interlocked directors and this thus affects financial market trends. Using an event-study methodology, this paper aims to investigate whether newspaper articles (1999-2013) mentioning CEOs and Chairmen affiliated to multiple organisations influence the stock market prices of the companies where they are appointed. Results highlight that when directors serve two different companies, they work as a transmission channel in influencing investors' knowledge and behaviour through media. Moreover, we find a stronger effect of indirect news over direct news which outlines that investors find highly informative the names of boards' leaders even when not directly associated to the firm.

Keywords: investors' knowledge; interlocking directorship; human resource management; media effect; text analysis; event study; investors' behaviour; knowledge management; news coverage; stock market; board of directors; domino effect.

DOI: 10.1504/EJIM.2023.134641

European Journal of International Management, 2023 Vol.21 No.4, pp.636 - 660

Received: 12 Apr 2019
Accepted: 17 Sep 2019
Published online: 03 Nov 2023 *

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