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Interlocking Directorates and Competition in Banking

Author

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  • GUGLIELMO BARONE
  • FABIANO SCHIVARDI
  • ENRICO SETTE

Abstract

We study the effects on corporate loan rates of an unexpected change in the Italian legislation that forbade interlocking directorates between banks. Exploiting multiple firm‐bank relationships to fully account for all unobserved heterogeneity, we find that prohibiting interlocks decreased the interest rates of previously interlocked banks by 14 basis points relative to other banks. The effect is stronger for high‐quality firms and for loans extended by interlocked banks with a large joint market share. Interest rates on loans from previously interlocked banks become more dispersed. Finally, firms borrowing more from previously interlocked banks expand investment, employment, and sales.

Suggested Citation

  • Guglielmo Barone & Fabiano Schivardi & Enrico Sette, 2025. "Interlocking Directorates and Competition in Banking," Journal of Finance, American Finance Association, vol. 80(4), pages 1963-2016, August.
    • Handle: RePEc:bla:jfinan:v:80:y:2025:i:4:p:1963-2016
    DOI: 10.1111/jofi.13464
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    Cited by:

    1. Geng, Heng & Hau, Harald & Michaely, Roni & Nguyen, Binh Hoang, 2025. "Common institutional investors and board representation in rival firms," Journal of Corporate Finance, Elsevier, vol. 94(C).
    2. Del Prete, Silvia & Papini, Giulio & Tonello, Marco, 2024. "Gender quotas, board diversity and spillover effects. Evidence from Italian banks," Journal of Economic Behavior & Organization, Elsevier, vol. 221(C), pages 148-173.

    More about this item

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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