We present causal evidence on the effect 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 effect on directors’ compensation, providing evidence of rent sharing.
joint with Ester Faia and Vincenzo Pezone
Reject & Resubmit Review of Corporate Finance Studies
This paper studies the sorting of firms and directors appointed to their boards. I leverage a novel finite-mixture random-effects model to estimate the contribution of unobserved firm and director heterogeneity while being the first to explicitly allow for an interaction between the two to estimate the quality of the match between board members and firms. Results reveal that positive complementarities drive positive sorting. Using hand-collected data and textual analysis to build a large dataset on directors’ skills and qualifications, I find directors with specialized skill sets to be associated with higher complementarities while, consistent with the idea of knowledge hierarchies in the firm. On the contrary, CEOs or CFOs tend to be generalists relying on directors’ advice. Finally, I exploit unexpected deaths of board members to establish a positive causal effect of boards, where productivity is concentrated to a few highly complementary directors, on firm value and firm performance.
This paper studies the role of social connections in shaping individuals' concerns about climate change. I combine granular climate data, region-level social network data and survey responses for 24 European countries in order to document large information spillovers. Individuals become more concerned about climate change when their geographically distant friends living in socially-connected regions have experienced large increases in temperatures since 1990. Exploring the heterogeneity of the spillover effects, I uncover that the learning via social networks plays a central role. Further, results illustrate the important role of social values and economic preferences for understanding how information spillovers affect individual concerns.