An Empirical Study On The Reconstruction Of Fractured Interlocking Directorates Based On The Dynamic Perspective

Interlocking directorates refer to the phenomenon that there is a member of one company’s board of directors, while hosting director position on another company’s board of directors. Since the existence of interlocking directorates, the two companies build a link with each other. Related researchers have found that by constituting interlocking directorates companies can benefit a lot from the tie. For businesses, the primary function of interlocking directorates between enterprises is the coordination and information transmission. As for the question that why build on corporate interlocking directorates, scholars’views are nothing less than two, that is, personal goals and organizational purposes. The broken-tie reconstitution hypothesis is that if one interlocking tie is reconstituted after its broken due to the turnover or retirement of directors, then its original existing purpose is to serve organizational strategy.Resource dependence theory is that no organization is an independent existence, and organizations need to maintain the relationship with outside world. According to that, organizations in order to manage out the uncertainty of accesses to resources will build the link with resource providers. Based on resource dependence theory, we use broken ties from2002to2008within Shanghai and Shenzhen A-shares interlocking directorates between companies as initial sample, and use Logit regression method to study the purpose of the building of interlocking directorates.This paper aims to verify that the organization will build interlocking directorates in order to manage the uncertainty of accesses to resources. The main methods of accesses to resources is divided into three, namely, within the same industry, between upstream and downstream industries and financial institutions. We find that:(1) when two companies in the same industry build an interlocking directorate links with each other, this connection is more likely to be reconstructed after accidental broken.(2) When one non-financial enterprise and one financial institution build interlocking directorate links, in which links are more likely to be reconstructed after fracture.(3) When two companies are located in the upstream and downstream industry respectively, the interlocking tie between them is more likely to be reconstructed after fracture. In addition, we further study the factors affecting the likelihood of the reconstitution of interlocking directorates ties in same-industry type and financial type, degree of competition for the industry and the debt to equity ratio respectively, and as well as the moderating effect of close level of headquarters on three main assumptions.Above conclusions not only demonstrate that the relationship between resource supplies will affect the behavior of building interlocking directorates on theory, but also provide useful insights into the making of China’s Antimonopoly Act in practical aspects. On the theoretical side resources dependence will be divided into three types, the vertical dependence, horizontal dependent and capital dependence. By using secondary data research, we analyzed the effect of the degree of resource dependence on the possibility of reconstruction after fracture; in practical aspect, rules of the "AML" in China have not yet been introduced, this study can provide meaningful insights.