The Economic Effect of Interlocking Directorates in Italy: New Evidence Using Centrality Measures

Computational & Mathematical Organization Theory, Forthcoming

35 Pages Posted: 17 Apr 2010 Last revised: 5 Apr 2013

See all articles by Ettore Croci

Ettore Croci

Catholic University of the Sacred Heart of Milan

Rosanna Grassi

Università degli Studi di Milano-Bicocca

Date Written: November 3, 2012

Abstract

We use measures of vertex centrality to examine interlocking directorates and their economic effects in Italy. We employ centrality measures like degree, eigenvector centrality, betweenness, and flow betweenness, along with the clustering coefficient. We document the existence of a negative relationship between both degree and eigenvector centrality and fi rm value. Betweenness and flow betweenness, on the other hand, are not associated with lower fi rm valuations. We argue that these diff erences derive from the di fferent properties of these measures: while degree and eigenvector centrality measures the influence and the power of the connections, betweennness and flow betweenness are proxies for the volume of information that passes between the nodes. This result is robust with respect to the use of both stock market and operating performance measures, as well as several controlling variables.

Keywords: Corporate boards, centrality, interlockings, firm performance, stock price

JEL Classification: C02, D85, G3, G34

Suggested Citation

Croci, Ettore and Grassi, Rosanna, The Economic Effect of Interlocking Directorates in Italy: New Evidence Using Centrality Measures (November 3, 2012). Computational & Mathematical Organization Theory, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1590269 or http://dx.doi.org/10.2139/ssrn.1590269

Ettore Croci (Contact Author)

Catholic University of the Sacred Heart of Milan ( email )

Largo Gemelli, 1
Via Necchi 9
Milan, MI 20123
Italy

Rosanna Grassi

Università degli Studi di Milano-Bicocca ( email )

Piazza dell'Ateneo Nuovo, 1
Milano, Milan 20126
Italy

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