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

Jiafu An, Tinghua Duan, Wenxuan Hou and Xianda Liu
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Tinghua Duan: LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique

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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.

Date: 2020-01-07
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Citations: View citations in EconPapers (5)

Published in Journal of International Financial Markets, Institutions and Money, 2020, 64, pp.101172. ⟨10.1016/j.intfin.2019.101172⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02993121

DOI: 10.1016/j.intfin.2019.101172

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