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Connections and performance in bankers’ turnover

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Author Info

  • Battistin, Erich
  • Graziano, Clara
  • Parigi, Bruno M.

Abstract

In this paper we study the impact of the connections of the top executives (Presidents, CEOs and General Managers) of Italian banks on their turnover and on bank performance. We measure managers’ connections by the kilometer distance between the province of the bank's headquarter and the manager's province of birth. We show that top managers tend to be local in the sense that the distribution of this distance is heavily skewed towards zero. On the basis of this evidence we investigate whether connections affect the duration of the appointment at the bank, and whether connections entrench managers at the expense of the bank's performance. We find that connections generally decrease the probability of bank manager’s turnover, and that the positive effect of performance on tenure is strongly attenuated once connections are taken into account. Furthermore we find that for any bank type performance does not increase with connections. On the contrary, we show that having connected managers hurts performance in Mutual, Cooperative and Rural banks. Overall these findings suggest that connections are collusion devices to share and maintain rents at the expenses of bank performance.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 56 (2012)
Issue (Month): 3 ()
Pages: 470-487

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Handle: RePEc:eee:eecrev:v:56:y:2012:i:3:p:470-487

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Web page: http://www.elsevier.com/locate/eer

Related research

Keywords: Corporate governance; Executive turnover; Commercial and Cooperative banks; Panel data analysis; Survival analysis; Social networks;

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References

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Cited by:
  1. Erich Battistin & Paolo Bortoluzzi & Fabio Buttignon & Martina Serafini & Marco Vedovato, 2013. "The Effects of Private Equity on Targets: Majority versus Minority Investments," "Marco Fanno" Working Papers 0167, Dipartimento di Scienze Economiche "Marco Fanno".
  2. Silvia Del Prete & Maria Lucia Stefani, 2013. "Women on Italian bank boards: are they “gold dust”?," Questioni di Economia e Finanza (Occasional Papers) 175, Bank of Italy, Economic Research and International Relations Area.

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