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The legacy of wars around the world: Evidence from military directors

Jiafu An, Tinghua Duan, Wenxuan Hou and Xianda Liu

Journal of International Financial Markets, Institutions and Money, 2020, vol. 64, issue C

Abstract: This study estimates the effects of wars on countries and firms. We first show immediate negative effects of wars on economic and financial development as well as legal institutions. Using a cross-country sample of 93,697 firm-year observations, we further argue and show that (i) wars increase the supply of military directors in corporate boards; and (ii) military directors reduce firm performance as measured by Tobin’s Q and return on assets (ROA). We interpret these lingering effects as military directors possessing social capital but lacking business expertise. Our results are robust to a matched sample, a lagged difference model, a dynamic general method of moments model and to the control of country, industry and year fixed effects.

Keywords: War; Military directors; Board directors; Firm performance (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1016/j.intfin.2019.101172

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Journal of International Financial Markets, Institutions and Money is currently edited by I. Mathur and C. J. Neely

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