The effects of board size and ‘busy’ directors on the market value of Italian companies

Abstract

This paper presents evidence that corporate governance quality measured by (1) the board size and (2) the fraction of directors that serve on more corporate boards, influences the market value of firms. The analysis is based in Italy, a country that is characterized by family and concentrated ownership, low legal protection of investors and pyramidal firm structures. Our empirical results suggest that the level of ‘busy-ness’ of corporate directors as a measure of board effectiveness has a significant influence on firm’s market performance. By contrast, we find limited evidence that board size has a substantial impact on the market valuation, except in small and medium enterprises and in some specific industry sectors

Company financial performance: Does board size matter? Case of the EUROSTOXX50 index

“…The lack of relationship has been presented in the studies of Crespi (2010) in Spain; Di Pietra et al (2008) in Italy; Beiner et al (2004) in Switzerland, Lehn et al (2009) in the USA; Yammeesri and Herath (2010) in Thailand and finally, Dalton et al (1998) and Gill et al (2009) …”

Financial Reporting Practices of Italian SMEs: Why Do They Disclose More?

“…These represent almost all the Italian 2 companies and are characterized by a weak corporate governance, related to a concentrated ownership and family controlled (Corbetta and Montemerlo, 1999;Melis, 2000;Brunello et al, 2003;Santarelli and Lotti, 2005;Di Pietra et al, 2008), which obviously impacts the financial statements" quality and disclosure level (Cascino et al, 2010;Antonelli et al, 2016;Torchia and Calabrò, 2016). We focus on the tables of the financial statement notes used by the filers of the abbreviated financial statements, which are proper of the standard financial statements.…”

Community structure and centrality effects in the South African company network

“…The research into the consequences of interlocks for company behaviour is well summarised by Mizruchi (1996), while Davis, Yoo and Baker (2003) and Di Pietra et al (2008) present more recent evidence. To summarise, interlocking directorates have been shown to facilitate the adoption of executive compensation practices such as "golden parachutes" (Cochran, Wood & Jones, 1985), "greenmail" (Kosnik, 1987), and "poison pills" (Davis, 1991;Davis & Greve, 1997).…”

“…Interlocks also serve to facilitate contributions to political candidates and congressional testimony (Mizruchi, 1992), as well as switching behaviour between stock exchanges (Rao, Davis & Ward, 2000). Di Pietra et al (2008) find that the number of additional directorships held by a board of directors (expressed as a proportion of board size) has a positive association with the market value of a company. Interlocked directors tend to be less effective at monitoring (Fich & Shivdasani, 2006) and more likely to be absent from board meetings (Jiraporn, 2007).…”