I sure hope not and don't believe they do, but it doesn't mean I am careless about leaving broken links "broken". Came across a very good thread on Highrankings taking about this very subject. While I would be very inclined to say having broken or dead links on your site is not a problem, and NO you will not get penalized for it. However I can't honestly say I think it will help either. Last year I was told by a credible source that sizable amounts of broken links on a site could potentially have a bad effect on search engine rankings. While the reasoning is good, personally I didn't buy it. The main reason for this came down to the credibility of those pages that are being linked to. A search engine for example like Google can not "verify" that these pages hold valued resources. Leaving the search engine in a condundrum to penalize or do nothing at all depending on the mounting evidence to suggest otherwise. How about indications in the anchor text, amount of link churn on the page in relation to broken links, or amount of broken links per page in contrast to broken links of the whole. Could those help to decide whether broken links are good or bad.
The general concensus is that there is nothing wrong with a dead/broken link for the most part. I totally agree. I can't say I like them much on my pages though, as most would probably agree. Nothing like clicking on a dead link for a site, and as a search marketer getting the bug to figure out what happened to the site or page and researching it. But thats me. Alan Perkins and Michael M. on High Rankings get into a discussion about whether broken links on scale are "bleeding pagerank" away from the page as they are having a detrimential effect on the global Pagerank of the site (in terms of the classic PageRank calculation). Alan disagrees and says "dead links are ignored for Pagerank calculations, since they are probably treated as dangling links (links to documents that have not been retrieved) and dangling links are ignored." The subject goes back and forth with no one really proving anything, until Michael posts some lines straight from the original PageRank document to back up his claims of their negative effect:
The text of links is treated in a special way in our search engine. Most search engines associate the text of a link with the page that the link is on. In addition, we associate it with the page the link points to. This has several advantages. First, anchors often provide more accurate descriptions of web pages than the pages themselves. Second, anchors may exist for documents which cannot be indexed by a text-based search engine, such as images, programs, and databases. This makes it possible to return web pages which have not actually been crawled. Note that pages that have not been crawled can cause problems, since they are never checked for validity before being returned to the user. In this case, the search engine can even return a page that never actually existed, but had hyperlinks pointing to it. However, it is possible to sort the results, so that this particular problem rarely happens.
You decide for yourself, but it will be noted that while the Google founder do mention that dead or dangling links are neither good or bad, they do mention the problem can be fixed by sorting the results thus allowing this problem not to happen often. I imagine the time since then ways to fix this have gotten substantially more advanced and one can only wonder how they look at dead links today.
Continue discussion on HighRankings *Barry is out for the day, so I will be taking on full coverage today. If there is anything you want to hear let me know - Ben.