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Banks’ centrality in corporate interlock networks: evidences in Italy

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  • Farina, Vincenzo

Abstract

The idea that the governance mechanisms affect firms’ performance is well acknowledged in management literature. The settings prevailing in governance studies explain board’s roles at the light of the agency theory framework. However, a complementary perspective is focused on the acquisition of critical resources closely related to activation of external relations with the most influential actors of firm’s environment. One such kind of external relationship is called interlocking directorates and occur when an individual simultaneously sits on the board of two companies. Moreover, since banks control financial capital, that is a resource that has a universal value for all firms, they are more likely to be very important actors inside corporate networks. By analyzing interlocking directorates among listed banks and non financial firms in Italy, using the methods and theory of social network analysis (SNA), I find that banks are the most influential actors in the network and that centrality in the network enhances financial performance.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 11698.

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Date of creation: 2008
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Handle: RePEc:pra:mprapa:11698

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Keywords: Corporate Governance; Board of Directors; Performance; Social network analysis;

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  1. Molyneux, Philip, 2003. ""Does Size Matter?" Financial Restructuring Under Emu," EIFC - Technology and Finance Working Papers 30, United Nations University, Institute for New Technologies.
  2. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
  3. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
  4. John Goddard & Phil Molyneux & John O. S. Wilson, 2004. "The profitability of european banks: a cross-sectional and dynamic panel analysis," Manchester School, University of Manchester, vol. 72(3), pages 363-381, 06.
  5. Demirguc-Kunt, Asli & Huizinga, Harry, 2000. "Financial structure and bank profitability," Policy Research Working Paper Series 2430, The World Bank.
  6. Lex Donaldson & James H. Davis, 1991. "Stewardship Theory or Agency Theory: CEO Governance and Shareholder Returns," Australian Journal of Management, Australian School of Business, vol. 16(1), pages 49-64, June.
  7. John Child & Suzana Rodrigues, 2003. "Corporate Governance and New Organizational Forms: Issues of Double and Multiple Agency," Journal of Management and Governance, Springer, vol. 7(4), pages 337-360, December.
  8. Leo Mac Canna & Niamh Brennan & Eleanor O'Higgins, 1998. "National Networks of Corporate Power: An Irish Perspective," Journal of Management and Governance, Springer, vol. 2(4), pages 357-379, December.
  9. Almeida, Paul & Dokko, Gina & Rosenkopf, Lori, 2003. "Startup size and the mechanisms of external learning: increasing opportunity and decreasing ability?," Research Policy, Elsevier, vol. 32(2), pages 301-315, February.
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Cited by:
  1. Carlos Drago & Francesco Millo & Roberto Ricciuti & Paolo Santella, 2011. "Corporate Governance Reforms, Interlocking Directorship Networks and Company Value in Italy (1998-2007)," CESifo Working Paper Series 3322, CESifo Group Munich.

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