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Board composition and performance of state-owned enterprises: Quasi-experimental evidence

Author

Listed:
  • Audinga Baltrunaite

    (Bank of Italy)

  • Mario Cannella

    (Northwestern University)

  • Sauro Mocetti

    (Bank of Italy)

  • Giacomo Roma

    (Bank of Italy)

Abstract

The quality of governance crucially affects corporate outcomes, and may be particularly important for state-owned enterprises (SOEs) not disciplined by market competition forces. We examine the impact of board composition on the performance of companies controlled by public entities in Italy. For this purpose, we exploit a reform-induced exogenous change in board composition, aimed at increasing female representation and at reducing the revolving-door phenomenon. The law’s provisions were binding for SOEs, but not for companies with a minority share of public ownership, allowing us to adopt a difference-in-differences estimation. The results show that female presence on the boards of directors of SOEs has increased, while that of former politicians has decreased. The new directors have mostly replaced older and less talented men, thereby rejuvenating the boards and improving their quality. To assess the effects of the board shake-up on firm performance, we analyse companies’ balance sheets and survey information on citizens’ satisfaction with the provision of local public services and on objective measures of their quality. While we detect no significant effects on firm productivity, we find that profitability increases and leverage decreases, thereby reducing corporate credit risk. Finally, there is evidence consistent with an improvement in the quality of SOEs’ output.

Suggested Citation

  • Audinga Baltrunaite & Mario Cannella & Sauro Mocetti & Giacomo Roma, "undated". "Board composition and performance of state-owned enterprises: Quasi-experimental evidence," Temi di discussione (Economic working papers) 1328, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:wptemi:td_1328_21
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    Cited by:

    1. Sauro Mocetti & Giacomo Roma, 2020. "From 8,000 to 1,000? Rationalization and governance of Italian Government-owned enterprises," Questioni di Economia e Finanza (Occasional Papers) 570, Bank of Italy, Economic Research and International Relations Area.
    2. Barbara Pistoresi & Erica Poma & Alberto Rinaldi, 2022. "Gender quota on corporate boards in Italy: spillover effects and financial performance," Department of Economics 0208, University of Modena and Reggio E., Faculty of Economics "Marco Biagi".

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    More about this item

    Keywords

    governance; state-owned enterprises; board composition; gender quotas.;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L32 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Public Enterprises; Public-Private Enterprises
    • H42 - Public Economics - - Publicly Provided Goods - - - Publicly Provided Private Goods

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