THE TRIAD THAT BINDS: HOW COMMON FINANCIAL ANALYST COVERAGE REVEALS DIFFERENT MOTIVATIONS OF CORPORATE LEADERS TO MAINTAIN BOARD INTERLOCKS
Abstract
This study explores the structural embeddedness of board interlocks in financial analysts’ firm coverage ties. Drawing on the theories of triangular ties, I conceptualize the relationship between financial analysts, a focal CEO, and the interlock director as a triad and examine how the positivity or negativity of analyst stock recommendations regarding the focal firm CEO and the interlock directors influence the maintenance of the board interlock ties. The theoretical perspectives and empirical findings of this study suggest that a structural shift from open to closed triad, where the focal firm CEO and the interlock director are followed by a common set of financial analysts, makes dyad members prefer partners with similar, rather than better stock recommendations to avoid unfavorable social comparison and cognitive dissonance.