Endogeneity in Interlocks and Performance Analysis: A Firm Size Perspective

Tullio Buccellato (), Riccardo Busin (), Roberto Casarin and Giancarlo Corò ()
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Tullio Buccellato: Economic Research Department, Confindustria
Riccardo Busin: VERA, Ca' Foscari University of Venice
Giancarlo Corò: Department of Economics, Ca' Foscari University of Venice

No 2020:25, Working Papers from Department of Economics, University of Venice "Ca' Foscari"

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 (search for similar items in EconPapers)
JEL-codes: C02 C26 D85 G30 G34 L14 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2020
New Economics Papers: this item is included in nep-net, nep-ore and nep-sbm
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