Common Shareholders and Interlocking Directors: The Relation Between Two Corporate Networks

This paper studies the empirical relationship between common ownership and interlocking directorships. I estimate a gravity equation model for the probability that a pair of firms will have a common director, as a function of the geographic distance between the firms, their sizes, and a set of covariates, including measures of common ownership between the firms. The main finding is that, robustly across several measures of common ownership, firm pairs with higher levels of common ownership are associated with a higher likelihood of sharing directors. Also, their distance in the network of directors is smaller on average. Consistent with the "gravity" interpretation, larger firms are more likely to share directors, and firms that are geographically more distant are less likely to share directors.