Corporate governance reforms, interlocking directorship and company performance in Italy

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

doi:10.1016/j.irle.2014.09.003

Cited by 47 publications

(35 citation statements)

References 43 publications

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“…This possibility is in line with more general literature, which suggests that interlocking directorships may be associated with poorer performance and lower value of companies (2)(3)(4)(5), social embeddedness that limits their effectiveness (6), excessive remuneration of directors (7,8) and conflicts of interest, lack of commitment of directors, and lack of diversity (9,10).…”

supporting

confidence: 85%

Interlocking directorates in Irish companies using a latent space model for bipartite networks

Friel

Rastelli

Wyse

et al. 2016

Proc. Natl. Acad. Sci. U.S.A.

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We analyze the temporal bipartite network of the leading Irish companies and their directors from 2003 to 2013, encompassing the end of the Celtic Tiger boom and the ensuing financial crisis in 2008. We focus on the evolution of company interlocks, whereby a company director simultaneously sits on two or more boards. We develop a statistical model for this dataset by embedding the positions of companies and directors in a latent space. The temporal evolution of the network is modeled through three levels of Markovian dependence: one on the model parameters, one on the companies' latent positions, and one on the edges themselves. The model is estimated using Bayesian inference. Our analysis reveals that the level of interlocking, as measured by a contraction of the latent space, increased before and during the crisis, reaching a peak in 2009, and has generally stabilized since then.Bayesian estimation | corporate governance | Ireland | Markov chain Monte Carlo | social network analysis I n the past two decades, Ireland has seen big changes to its economic prosperity. From the mid-1990s to 2007, there was a period of rapid economic growth, often referred to as the Celtic Tiger. However, in 2008, there was a major financial and banking crisis that had a devastating effect on the economy and was associated with a series of banking scandals. Since then, there has been considerable interest in ascertaining the roots of the crisis.Interlocking directorships have been identified as one possible factor in the Irish economic crash (1), possibly contributing to "group think" in the economy and lack of autonomy of individual companies. This possibility is in line with more general literature, which suggests that interlocking directorships may be associated with poorer performance and lower value of companies (2-5), social embeddedness that limits their effectiveness (6), excessive remuneration of directors (7,8) and conflicts of interest, lack of commitment of directors, and lack of diversity (9, 10).In this article, we use bipartite networks to investigate interlocking directorships in companies listed on the Irish Stock Exchange (ISE) between 2003 and 2013 inclusive. Bipartite networks have two node types such that two nodes can be linked only if they are of different types. Here, one set of nodes consists of the directors who fill board positions and the other consists of the boards themselves, each of which corresponds to a unique company or organization.We develop a dynamic statistical model which captures key features of the evolution of interlocking directorships over time. Our data cover the period from 2003 to 2013, allowing an investigation of network behavior in the years before and after the crisis. A key aspect of the model that we develop is that it allows for a statistically principled visual representation of the network's evolution over time. Clancy et al. (1) examined Irish interlocking directorates, but over a shorter period from 2005 to 2007, which did not cover the financial crash, and they did not carr...

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supporting

confidence: 85%

Interlocking directorates in Irish companies using a latent space model for bipartite networks

Friel

Rastelli

Wyse

et al. 2016

Proc. Natl. Acad. Sci. U.S.A.

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“…Entretanto, tal efeito não é determinado pela estrutura de Governança. Isso já foi observado a partir dos coeficientes de correlação, pois apesar de serem significativos, foram fracos em todos os casos, ou seja; o valor de mercado é função da estrutura de governança e outros fatores, tais como: (i) capacidade de gestão, (ii) posicionamento estratégico, (iii) estrutura de mercado, (iv) volume de investimentos, entre outros (HEALY; PALEPU, 2001;BROWN;CAYLOR, 2009;CARVA-LHAL-DA-SILVA;CHIEN, 2013;DRAGO et al, 2015;MATYNOVA;RENNEBOOG, 2011). Por fim, a Tabela 3 apresenta a média dos índices analisados ao longo do período de interesse.…”

Section: Análise De Dados E Resultados 41 Estrutura De Governança Eunclassified

“…Na comparação N2 x NM, observou-se uma divergência parcial dos resultados com a expectativa teórica, pois o Nível 2 apresentou índices superiores aos do Novo Mercado (ANDRADE; BERNILE; HOOD III, 2014;BLISS;CHENG;DENIS, 2015). A observância de um maior nível de payout entre as empresas do Nível 2 pode se justificar por maior potencial de crescimento das firmas, características específica como a dispersão acionária, o tamanho das empresas e o setor em que atuam (BEHN; CARVER; NEAL, 2013;BLISS;CHENG;DENIS, 2015;DRAGO et al, 2015;CARVALHAL-DA-SILVA;CHIEN, 2013). Tais resultados podem se justificar ainda em função de similaridades entre os instrumentos de fato utilizados pelas empresas do Nível 2, o ambiente econômico para as empresas listadas nesse segmento, menor aversão ao risco agregado com a maior expectativa de retorno futuro (BOULTON; BRAGA-ALVES; SHASTRI, 2012;CHANG;CHOU;HUANG, 2014).…”

Section: Considerações Finaisunclassified

“…Isso implica que o aprofundamento dos estudos sobre os efeitos da estrutura de governança no desempenho suscita maiores esclarecimentos. Com esse objetivo, o presente estudo analisou a relação entre os níveis de governança e os indicadores de desempenho da companhia, buscando responder a seguinte pergunta: qual é a relação entre os níveis de governança e os indicadores de desempenho das empresas brasileiras no período de 2008 a 2013? Os efeitos da estrutura de governança sobre o desempenho têm sido estudados sistematicamente (YOO;JUNG, 2015;DRAGO et al, 2015), entretanto os resultados ainda apresentam divergências. Diante disso, o presente trabalho contribuirá para trazer maior clareza quanto ao efeito da estrutura de governança sobre os indicadores de desempenho de empresas participantes dos níveis de governança da BM&FBOVESPA.…”

Section: Introductionunclassified

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Relação entre Níveis de Governança, Política de Dividendos, Endividamento e Valor das Empresas Brasileiras

Marques¹,

Alves²,

Amaral³

et al. 2015

RECFin

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“…The Italian capitalism has been characterized by the presence of cross shareholdings, pyramidal groups and as well as ID. Santella et al (2009) and Drago et al (2015) provide evidence that Italian capitalism was characterized by the use of the cross-financial participation by the "industrial families". In both cases cross-financial participation was typically associated with a dense interlocking directorship structure.…”

Section: Corporate Governance Reformsmentioning

confidence: 99%

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

Drago

Ricciuti

Santella³

2016

SSRN Journal

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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.

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Corporate governance reforms, interlocking directorship and company performance in Italy

Cited by 47 publications

References 43 publications

Interlocking directorates in Irish companies using a latent space model for bipartite networks

Interlocking directorates in Irish companies using a latent space model for bipartite networks

Relação entre Níveis de Governança, Política de Dividendos, Endividamento e Valor das Empresas Brasileiras

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

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