The influence of board interlocking on debt capital cost

Abstract

The objective of this research is to analyze the impact of board interlocking on debt capital cost of non-financial publicly traded Brazilian companies, listed on B3 (Brazil Stock Exchange) between 2010 and 2019. The motivation for this research arose from the Resource Dependence Theory, which states that companies need external resources, including financial capital, which can explain board interlocking. I collected data from Economática © database and the Securities and Exchange Commission (CVM) website. The results showed that companies that share counselors with other firms have a lower cost of debt capital; and when analyzing only companies that practice board interlocking, I found that sharing counselors with companies in the financial sector reduces debt capital cost. In practice, the research may be relevant for companies that have difficulties in their indebtedness structures, as there is evidence that sharing counselors with other companies can minimize transaction costs and facilitate access to credit on better terms.