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Corporate governance reforms, interlocking directorship and company performance in Italy

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  • Drago, Carlo
  • Millo, Francesco
  • Ricciuti, Roberto
  • Santella, Paolo

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.

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  • Drago, Carlo & Millo, Francesco & Ricciuti, Roberto & Santella, Paolo, 2015. "Corporate governance reforms, interlocking directorship and company performance in Italy," International Review of Law and Economics, Elsevier, vol. 41(C), pages 38-49.
    • Handle: RePEc:eee:irlaec:v:41:y:2015:i:c:p:38-49
    DOI: 10.1016/j.irle.2014.09.003
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    Cited by:

    1. Drago, Carlo & Ricciuti, Roberto, 2017. "Communities detection as a tool to assess a reform of the Italian interlocking directorship network," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 466(C), pages 91-104.
    2. Carlo Drago & Roberto Ricciuti & Paolo Santella, 2015. "An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform," Working Papers 2015.82, Fondazione Eni Enrico Mattei.
    3. Andrea Fracasso & Valentina Peruzzi & Chiara Tomasi, 2024. "Multiple banking relationships: the role of firm connectedness," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 33(5), pages 1231-1252.
    4. Drago, Carlo, 2015. "Exploring the Community Structure of Complex Networks," MPRA Paper 81024, University Library of Munich, Germany.
    5. Bénédicte Brullebaut & Isabelle Allemand & Enrico Prinz & Florence Thépot, 2022. "Persistence in corporate networks through boards of directors? A longitudinal study of interlocks in France, Germany, and the United Kingdom," Review of Managerial Science, Springer, vol. 16(6), pages 1743-1782, August.
    6. Xavier Hollandts & Nicolas Aubert, 2019. "La gouvernance salariale : contribution de la représentation des salariés à la gouvernance d’entreprise," Revue Finance Contrôle Stratégie, revues.org, vol. 22(1), pages 63-88, March.
    7. Maria Rosa Battaggion & Vittoria Cerasi, 2018. "Endogenous interlocking directorates," Working Papers 380, University of Milano-Bicocca, Department of Economics, revised 01 May 2018.
    8. Xavier Hollandts & Daniela Borodak & Ariane Tichit, 2018. "La dynamique de changement des formes de gouvernance : le cas français (2000-2014)," Revue Finance Contrôle Stratégie, revues.org, vol. 21(3), pages 129-158, December.
    9. Claudine Pereira Salgado & Vivian Sebben Adami & Jorge Renato de Souza Verschoore Filho & Cristiano Machado Costa, 2023. "Board of Directors’ Interlocks: A Social Network Analysis Tutorial," RAC - Revista de Administração Contemporânea (Journal of Contemporary Administration), ANPAD - Associação Nacional de Pós-Graduação e Pesquisa em Administração, vol. 27(Vol. 27 N), pages 210286-2102.
    10. Carlo Drago & Roberto Ricciuti, 2019. "Bootstrapping the Gini Index of the Network Degree: An Application for Italian Corporate Governance," Working Papers 05/2019, University of Verona, Department of Economics.
    11. Sabri Boubaker & Pascal Nguyen & Wael Rouatbi, 2016. "Multiple Large Shareholders and Corporate Risk†taking: Evidence from French Family Firms," European Financial Management, European Financial Management Association, vol. 22(4), pages 697-745, September.
    12. Evandro de Nez & Paulo Roberto da Cunha, 2018. "Influence of board interlocking in the selection of the audit firm on the mandatory caster," Contaduría y Administración, Accounting and Management, vol. 63(2), pages 5-6, Junio.
    13. repec:ctc:sdimse:dime19_01 is not listed on IDEAS
    14. Carlo Drago & Francesco Millo & Roberto Ricciuti & Paolo Satella, 2011. "The Role of Women in the Italian Network of Boards of Directors, 2003-2010," Working Papers 10/2011, University of Verona, Department of Economics.
    15. Drago, Carlo, 2015. "Exploring the Community Structure of Complex Networks," MPRA Paper 81024, University Library of Munich, Germany.
    16. Battaggion, Maria Rosa & Cerasi, Vittoria, 2020. "Strategic interlocking directorates," Journal of Economic Behavior & Organization, Elsevier, vol. 178(C), pages 85-101.
    17. Belot, François & Waxin, Timothée, 2022. "Mandatory employee board representation: Good news for family firms?," International Review of Law and Economics, Elsevier, vol. 71(C).
    18. Su Kun & Liu Heng, 2019. "The Effect of Interlocking Director Network on Corporate Risk Taking: Lessons from China," Entrepreneurship Research Journal, De Gruyter, vol. 9(1), pages 1-21, January.

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    More about this item

    Keywords

    Corporate governance; Interlocking directorships; Social network analysis; Empirical corporate finance;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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