Job Market Paper

The Right Director in the Right Firm: Director Heterogeneity, Sorting and Firm Performance

[Draft Available Soon]

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. Keywords: Sorting, Board of Directors, Complementarities, Skills and Qualifications, Productivity Concentration

Working Papers

The Value of Firm Networks: A Natural Experiment on Board Connections, June 2021

joint with Ester Faia and Vincenzo Pezone

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.

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The paper is also available as SAFE Working Paper No. 269 and CEPR Discussion Paper No. 14591
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The Employment Consequences of Automation and Offshoring: A Labor Market Sorting View, March 2021

joint with Ester Faia, Sebastien Laffitte and Gianmarco Ottaviano

We show, theoretically and empirically, that the effects of technological change associated with automation and offshoring on the labor market can substantially deviate from standard neoclassical conclusions when search frictions hinder efficient assortative matching between firms with heterogeneous tasks and workers with heterogeneous skills. Our key hypothesis is that better matches enjoy a comparative advantage in exploiting automation and a comparative disadvantage in exploiting offshoring. It implies that automation (offshoring) may reduce (raise) employment by lengthening (shortening) unemployment duration due to higher (lower) match selectivity. We find empirical support for this implication in a dataset covering 92 occupations and 16 sec- tors in 13 European countries from 1995 to 2010.

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The paper is also available as CEPR Discussion Paper No. 14787 and IZA Working Paper No.13267
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Global Banking: Endogenous Competition and Risk Taking

with Ester Faia, Sebastien Laffitte and Gianmarco Ottaviano
European Economic Review, Vol. 133, April 2021

When banks expand abroad, their riskiness decreases if foreign expansion happens in destination countries that are more competitive than their origin countries. We reach this conclusion in three steps. First, we develop a flexible dynamic model of global banking with endogenous competition and endogenous risk-taking. Second, we calibrate and simulate the model to generate empirically relevant predictions. Third, we validate these predictions by testing them on an original dataset covering the activities of the 15 European global systemically important banks (G-SIBs). Our results hold across alternative measures of individual and systemic bank risk.

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