An Attempt to Disperse the Italian Interlocking Directorship Network: Analyzing the Effects of the 2011 Reform

Abstract

The purpose of this paper is to analyze the effects on the Italian directorship network of the corporate governance reform that was introduced in Italy in 2011 to prevent interlocking directorships in the financial sector. Interlocking directorships are important communication channels among companies and may have anticompetitive effect. We apply community detection techniques to the analysis of the networks in 2009 and 2012 to ascertain the effect of the reform. We find that, although the number of interlocking directorships decreases in 2012, the reduction takes place mainly at the periphery of the network whereas the network core is stable, allowing the most connected companies to keep their strategic position.

Italian banking regulation and the legal obstacles to corporate governance convergence

“…In a series of recent studies focused on listed firms, Drago et al. have observed a slight decline in interlocking directorates – both during the period 1998–2007 (Drago et al., 2015); and in the aftermath of the 2011 reform (Drago et al., 2016). This decline is not, however, observed across the board; in particular, Drago et al.…”

“…This decline is not, however, observed across the board; in particular, Drago et al. note that core companies within Italian capitalism continue to exhibit cross-shareholdings (Drago et al., 2016). Moreover, most listed firms continue to have a controlling shareholder – usually, members of the family that founded the firm.…”

“…As a consequence of these legal changes, the 2000s have marked a limited but continuous erosion of relationship capitalism in Italy -an erosion characterized, in part, by the decline in interlocking directorates and cross-shareholdings. In a series of recent studies focused on listed firms, Drago et al have observed a slight decline in interlocking directorates -both during the period 1998-2007 (Drago et al, 2015); and in the aftermath of the 2011 reform (Drago et al, 2016). This decline is not, however, observed across the board; in particular, Drago et al note that core companies within Italian capitalism continue to exhibit crossshareholdings (Drago et al, 2016).…”

“…In a series of recent studies focused on listed firms, Drago et al have observed a slight decline in interlocking directorates -both during the period 1998-2007 (Drago et al, 2015); and in the aftermath of the 2011 reform (Drago et al, 2016). This decline is not, however, observed across the board; in particular, Drago et al note that core companies within Italian capitalism continue to exhibit crossshareholdings (Drago et al, 2016). Moreover, most listed firms continue to have a controlling shareholder -usually, members of the family that founded the firm.…”