Interlocking board profile of companies in Turkey: An empirical study on interlocking directorship and firm performance

The relationship between interlocking directors and firm performance has long been debated. However, there is no consensus in the literature on this issue. The approach of resource dependency theory to interlocking directors is in line with its basic assumptions. Interlocking directors are considered a critical resource for companies. In this context, the focus is on its potential benefits. The agency theory, on the other hand, focuses on the negative effects of such managers with the idea that it will increase their workload and agency costs. There have been studies in which both perspectives have been supported in their own contexts. In these studies, the relationship between interlocking directors and performance is mostly one-dimensional and directly addressed. In this study, different dimensions of interlocking directors (interlocking director from the family and board busyness) are discussed together. In addition to the direct effects of interlocking directorship from the family and board busyness on performance, the moderator effect of board diversity is also included in a single model. The sample of the study consists of 294 observations obtained from the data of 49 non-profit companies included in the BIST 100 index between 2014-2019. Panel EKK (pooled regression) model was used for the analysis of these data. The result of the analysis shows that there is an intense interest in interlocking directorships in Turkey. It is seen that family members also come into prominence in this relationship. No direct impact of interlocking directorships on performance has been identified. However, significant negative results were obtained regarding the different dimensions of interlocking directorships. It was concluded that interlocking directorship and board busyness from the family reduced performance. The assumption that board diversity, included in the model as a moderator variable, would positively improve the relationship between interlocking directorship and performance was not supported. A relationship has emerged in the opposite direction to the expected effect. Board diversity adversely affects the relationship between interlocking directorship and performance. While the positive relations foreseen by the resource dependency theory in the Turkish context were not supported, results were obtained that supported the agency theory.