ENHANCING THE VALUE OF DIRECTORS’ HUMAN AND SOCIAL CAPITAL: THE ROLE OF THE BOARD’S LEADERSHIP STRUCTURE
Sundaramurthy, C., Kor, Y., Pukthuanthong-Le, K.
Type of Research
Peer-Reviewed Paper Presentations
2015, After July
Discipline-based scholarship (basic research)
In this paper we study the interaction between board leadership and board capital, shining the spotlight on the interplay between the monitoring and resource provision roles of the board. While the importance of these two roles has been recognized and studied individually, using predominantly agency theory in the case of the former role and resource dependence and human capital lenses in the latter, the inter-play between these roles has received scant attention. Using a sample of 360 biotechnology firms that went public between1995-2010, we demonstrate that board duality accentuates the positive impacts of directors’ industry-specific experience and experience on the boards of public companies on pre-IPO performance, while non-duality, separation of the CEO and Chair roles, enhances the effects of these experiences on post-IPO performance. Duality also accentuates the positive impact of directors’ CEO-experience on post-IPO performance. Thus, our study indicates that the interactive effects of board leadership and board capital vary between the IPO and post-IPO context and depends on the type of social and human capital of the board. This study’s findings therefore highlight the effectiveness and ineffectiveness of duality, underscoring the potential complementarities and negative synergies between board leadership structure and board capital. An important implication of our study’s finding is that studying the interaction between governance mechanisms and board capital is a very fruitful future research direction that can surface more holistic understandings of board governance.