Determinants of Intra-group Interlocking in European listed business groups

Focusing on listed business groups, characterized by the presence of at least two affiliated-listed companies, and following the contingency perspective, this study aims to explore some determinants of intra-group interlockings (IgI). In particular, the study analyzes the controlling shareholder type (family, State, coalitions), the business ties, and the separation between ownership and control, focusing on 315 listed business groups in different European countries, i.e. Belgium, France, Greece, Italy, Spain, and Portugal. Social Network Analysis (SNA) is applied to these groups, to compare the networks that originate from corporate boards of directors. We find that in groups controlled by the State the density of social links is lower than in those controlled by families and coalitions. We also observe that the strength of IgI is related to the degree of correlation of firms’ industries, even if this correlation is influenced by the separation between ownership and control and by the country regulation that protects minority shareholders. This study contributes to the understanding on why board members of listed parent companies sit (or do not sit) on the listed subsidiary boards and, relying on agency theory and resource dependence theory, proposes a theoretical framework. The results show that for listed groups the agency theory better explains the determinants of the IgI phenomenon.