Endogeneity in Interlocks and Performance Analysis: A Firm Size Perspective

41 Pages Posted: 12 Jan 2021

See all articles by Tullio Buccellato

Tullio Buccellato

Economic Research Department, Confindustria

Riccardo Busin

Ca' Foscari University of Venice

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics

Giancarlo Corò

Ca Foscari University of Venice - Dipartimento di Economia

Date Written: December 30, 2020

Abstract

This paper contributes to the literature on interlocking directorates (ID) by providing a new solution to the two econometric issues arising in the joint analysis of interlocks and firm performance which are the endogenous nature of ID and sample selection bias due to the exclusion of isolated firms. Some key determinants of ID network formation are identified and used to check for endogeneity. We analyze the impact of the positioning in the network on firms’ performance and inspect how the impact varies across firms of different sizes drawing on information relating to 37,324 firms in the interlocking network which, to our knowledge, is the widest dataset ever used in approaching the study of ID. Our results, made robust for endogeneity and sample selection bias, suggest that eigenvector centrality and the clustering coefficient have a positive and significant impact on all the performance measures and that this effect is more pronounced for small firms.

Keywords: Firm performance, interlocking directorates, network formation, network econometrics

JEL Classification: C02, C26, G30, G34, D85, L14

Suggested Citation

Buccellato, Tullio and Busin, Riccardo and Casarin, Roberto and Corò, Giancarlo, Endogeneity in Interlocks and Performance Analysis: A Firm Size Perspective (December 30, 2020). University Ca' Foscari of Venice, Dept. of Economics Research Paper Series No. 25/WP/2020, Available at SSRN: https://ssrn.com/abstract=3764525 or http://dx.doi.org/10.2139/ssrn.3764525

Tullio Buccellato

Economic Research Department, Confindustria ( email )

viale dell'Astronomia, 30
Rome, 00144
Italy

Riccardo Busin

Ca' Foscari University of Venice ( email )

Roberto Casarin

University Ca' Foscari of Venice - Department of Economics ( email )

San Giobbe 873/b
Venice, 30121
Italy
+39 030.298.91.49 (Phone)
+39 030.298.88.37 (Fax)

HOME PAGE: http://sites.google.com/view/robertocasarin

Giancarlo Corò (Contact Author)

Ca Foscari University of Venice - Dipartimento di Economia ( email )

Cannaregio 873
Venice, 30121
Italy

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