Unpacking the influence of interlocks on ESG outcomes

Abstract

An interlock is made when a director of a firm also takes a seat on the board of another firm. Prior research shows that this has a positive effect on ESG performance. This thesis examines the effect of board interlocks on environmental, social and governance performances separately, in the context of listed firms with their headquarters in the European Union. It is found that both the social and environmental pillar are not significantly influenced by interlocks. For governance, the performance is negatively influenced by interlocks. In line with the unique transparency in the EU, this is suggested to be the result of a lack of competitive advantages interlocks can offer. The moderating effect of the women on the board for the environmental performance, was negative, meaning more women on the board has a negative influence on the relationship between interlocks and the environmental score, this was unexpected. The women on the board ratio was not significant for the social and governance score. The knowledge gained in this research adds to a gap in the existing literature on the influence of interlocks in EU context, as well as giving practical use in policy making.