What's in a name? The valuation effect of directors’ sharing of surnames

Using surname sharing as a novel measure of social ties, we examine the effect of directors’ surname sharing on firm value. We find that boards with greater surname homogeneity are associated with lower firm value. This finding is not driven by familial ties. The negative effect of surname sharing o...

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Bibliographic Details
Published in:Journal of banking & finance Vol. 122; p. 105991
Main Authors: Tan, Youchao, Xiao, Jason, (Colin) Zeng, Cheng, Zou, Hong
Format: Journal Article
Language:English
Published: Elsevier B.V 01.01.2021
Subjects:
Board diversity
Board voting
Firm value
Social tie
Surname
M14
Board diversity
Firm value
G32
G02
Social tie
Surname
Board voting
ISSN:0378-4266, 1872-6372
Online Access:Get full text
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Summary:Using surname sharing as a novel measure of social ties, we examine the effect of directors’ surname sharing on firm value. We find that boards with greater surname homogeneity are associated with lower firm value. This finding is not driven by familial ties. The negative effect of surname sharing on firm value is more pronounced when directors share rare surnames and when firms operate in regions with stronger clan systems, but is attenuated by stronger corporate governance mechanisms. The market reacts positively to plausibly exogenous director resignations that reduce director surname sharing, and negatively to board appointments that increase director surname sharing. Director surname sharing lowers firm value by reducing director dissension, granting excess executive compensation, and increasing related-party transactions. Overall, our results suggest that directors’ surname sharing, an easy-to-trace but previously neglected social tie, can have significant economic consequences.
ISSN:0378-4266
1872-6372
DOI:10.1016/j.jbankfin.2020.105991