Corporate Governance Reforms, Interlocking Directorship and Company Performance in Italy

35 Pages Posted: 12 Oct 2014 Last revised: 17 Jan 2015

See all articles by Carlo Drago

Carlo Drago

University of Rome "Niccolò Cusano"

Francesco Millo

Bonfiglioli Group

Roberto Ricciuti

University of Verona - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Paolo Santella

Single Resolution Board

Date Written: October 10, 2014

Abstract

We analyze the effects of corporate governance reforms on interlocking directorship (ID), and we assess the relationship between interlocking directorships and company performance for the main Italian firms listed on the Italian stock exchange over 1998-2007. We use a unique dataset that includes corporate governance variables related to the board size, interlocking directorships and variables related to companies’ performances. The network analysis showed only some effectiveness of these reforms in slightly dispersing the web of companies. Using a diff-in-diff approach, we then find in the period considered a slight reduction in the returns of those companies where interlocking directorships were used the most, which confirms our assumption on the perverse effect of ID on company performance in a context prone to shareholder expropriation such as the Italian one.

Keywords: Corporate Governance, Interlocking Directorships, Social Network Analysis, Empirical Corporate Finance

JEL Classification: C33, G34, G38, L14

Suggested Citation

Drago, Carlo and Millo, Francesco and Ricciuti, Roberto and Santella, Paolo, Corporate Governance Reforms, Interlocking Directorship and Company Performance in Italy (October 10, 2014). International Review of Law and Economics, Volume 41, March 2015, Pages 38–49, Available at SSRN: https://ssrn.com/abstract=2508401

Carlo Drago

University of Rome "Niccolò Cusano" ( email )

Via Don Carlo Gnocchi, 3
Rome, 00166
Italy

Francesco Millo

Bonfiglioli Group ( email )

Via papa giovanni XXIII 7 c/o Bonfiglioli RIduttor
Lippo di Caldereara, Bologna, Bologna 40012
Italy

Roberto Ricciuti (Contact Author)

University of Verona - Department of Economics ( email )

Via dell'Artigliere, 8
37129 Verona
Italy

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Paolo Santella

Single Resolution Board

Rue de la Science 27
Bruxelles, 1000
Belgium

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