The value of firm networks: A natural experiment on board connections

Arbeitspapier

We present causal evidence on the e↵ect of boardroom networks on firm value and compensation policies. We exploit a ban on interlocking directorates of Italian financial and insurance companies as exogenous variation and show that firms that lose centrality in the network experience negative abnormal returns around the announcement date. The key driver of our results is the role of boardroom connections in reducing asymmetric information. The complementarities with the input-output and cross-ownership networks are consistent with this channel. Using hand-collected data, we also show that network centrality has a positive e↵ect on directors' compensation, providing evidence of rent sharing.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SAFE Working Paper ; No. 269

Classification and Topics

• Classification: Wirtschaft ; General Equilibrium and Disequilibrium: Input-Output Tables and Analysis ; Information and Market Efficiency; Event Studies; Insider Trading ; Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill ; Transactional Relationships; Contracts and Reputation; Networks
• Subject: Firm Networks ; Natural Experiment ; Executives' Compensation ; Interlocking Directorates

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Faia, Ester ; Mayer, Maximilian ; Pezone, Vincenzo
• Event: Veröffentlichung
• (who): Leibniz Institute for Financial Research SAFE
• (where): Frankfurt a. M.
• (when): 2021

Further information

• DOI: doi:10.2139/ssrn.3552485
• Handle: http://hdl.handle.net/10419/243277
• Last update: 10.03.2025, 11:42 AM CET