Post-Restructuring Governance: An Examination of Interlocking Directorates

This study presents an empirical examination of firm restructuring and interlocking directorates (i.e., board interlocks) in the post-asset restructuring period. Portfolio restructuring is an important area of study as it represents a shift in an organization's domain and involves critical decisions that impact firm boundaries and the allocation of resources. Drawing upon agency and institutional theories, we suggest firms experiencing poor performance will restructure and redesign their governance structures, namely the number of board interlocks, in the postrestructuring period so as to enhance organizational legitimacy. Additionally, in response to institutional pressures for improved performance, organizations may choose to co-opt the source of these pressures as a means of averting threats to its stability or existence. The results reveal a positive relationship between divestiture size and the number of board interlocks in the postrestructuring period. The findings address a significant gap in the extant literature by addressing the need for further research examining firms' propensity to implement corporate governance changes following a restructuring.