Relationship between Board Interlocking and Persistence in Profits

Abstract

This study aimed to verify the relationship between board interlocking and the persistence of profits of Brazilian companies. This research is defined as descriptive, documentary and quantitative, using multiple linear regression (OLS), with fixed sector and year effects and robust standard errors. The study population comprised the publicly traded Brazilian companies listed in B3 (Brazil, Bolsa and Balcão) from 2010 to 2016. The sample totaled 249 companies and 1.743 observations. The metrics used to measure the board interlocking were the Centrality of Degree and Intermediation, both obtained using the UNICET® software. From the findings it can be seen that board interlocking (degree centrality) is significantly related to the persistence of profits in Brazilian companies, however, board interlocking has no relation to persistence. It is concluded that directors holding direct positions in other companies have an effect on earnings persistence; however, when relationships are maintained indirectly, such effect is not perceived.