Board Interlocking in Brazil: Directors' Participation in Multiple Companies and Its Effect on Firm Value and Profitability

This article investigates the simultaneous participation of directors in 320 Brazilian-listed companies in 2001, 2003, and 2005. Our results show that interlocking directorates are a common practice in Brazil. Firm value is, on average, negatively impacted by interlocking directorships, especially in firms in which a majority of directors hold three or more board positions. We also find evidence of a nonlinear relationship between interlocking and return on assets, consistent with the hypothesis that low and moderate levels of this practice may be beneficial to a company, while a high degree of interconnectedness among directors is likely to hurt performance.