Corporate Governance and Firm Value in Italy : How Directors and Board Members Matter

This book expands on the literature on the characteristics of management boards by especially focusing on family-listed and family-controlled companies, as they are ideal for studying board heterogeneity. It uses specific multidimensional indices and in-depth econometric analysis to introduce new variables, such as international experience, that represent a source of competitive advantage for firms in today’s globalized world. In addition, by examining the heterogeneity ratio and the representation of independent and family directors, the book demonstrates how family-controlled firms use independent directors to import their heterogeneous expertise. The book makes a threefold contribution: for regulators, it offers suggestions on improving the quality of reporting in family-controlled firms; for researchers, it demonstrates the importance of including directors’ characteristics apart from the firm-specific factors in their analyses; and for practitioners, it shows that selecting directors with specific characteristics can have a substantial impact on firms’ performance. Preface 7 Contents 10 About the Author 11 List of Figures 12 List of Tables 13 Chapter 1: Introduction 16 Reference 18 Chapter 2: Board Composition and Its Heterogeneity 16 2.1 The Board of Directors 19 2.2 Agency Theory and Resource Dependency 20 2.3 Potential Benefits and Potential Costs Related to Heterogeneity 23 2.4 Board Heterogeneity: A Literature Review 23 2.4.1 The First Dimension: The Role of Gender 25 2.4.2 The Second Dimension: Social Aspects 27 2.4.3 The Third Dimension: Multidimensional Indexes and Overall Heterogeneity 28 2.5 Conclusions 29 References 29 Chapter 3: Directors ́ Characteristics and Firm ́s Performance: Research Design and Hypotheses 32 3.1 Family Firm: Strengths, Weaknesses, and Main Theories 32 3.2 Why Do We Study the Relation Between Directors ́ Characteristics and Family-Controlled Firms ́ Performance? 33 3.3 Research Design and Hypotheses 34 3.4 Definition of Family Firms 36 3.5 The Italian Family Firms 36 3.5.1 Geographical Distribution 38 3.5.2 Sectors and Industrial Districts 42 3.6 Conclusions 46 References 49 Chapter 4: Family Firms ́ Board Characteristics 52 4.1 The Report on Corporate Governance and the Company ́s Ownership Structure 52 4.2 Board Characteristics 56 4.2.1 Gender, Age, and Nationality 59 4.2.2 Level of Education 64 4.2.3 Professional Experience 67 4.2.3.1 Technical Professional Experience 68 4.2.3.2 General Professional Experience 71 4.2.4 International Experience 74 4.2.5 Family Members and Independent Directors 76 4.2.6 Lead Independent Director (LID) 79 4.2.7 Other Directors ́ Characteristics 81 4.3 Index Construction 86 4.3.1 The Social Heterogeneity Index 87 4.3.2 The Occupational Heterogeneity Index 87 4.3.3 The Overall Heterogeneity Index 88 4.3.4 The Global Heterogeneity Index 88 4.4 Conclusions 88 References 89 Chapter 5: Econometric Analysis 92 5.1 Dependent Variable: Performance 92 5.2 Control Variables 92 5.3 The Baseline Model 93 5.4 Heterogeneity Index Analysis 93 5.4.1 Robustness Test 97 5.5 Independent Directors and Heterogeneity Ratio 98 5.6 ``Mandatory ́ ́ and ``Not Mandatory Variables ́ ́ 99 5.7 Conclusions 114 References 114 Chapter 6: Conclusions 117 Reference 119 Appendices 120 Appendix A: Index Calculation and Variables 120 Appendix B: Variable Descriptions and Source 126 Appendix C: Descriptive Statistics 131 Appendix D: Correlation Matrix 133 Appendix E: Variable Impact on Performance 139 Appendix F: Scheme Proposed 143 References 145