We analyze the effects of corporate governance reforms on interlocking directorship (ID), and we assess the relationship between interlocking directorships and company performance for the main Italian firms listed on the Italian stock exchange over 1998-2007. We use a unique dataset that includes corporate governance variables related to the board size, interlocking directorships and variables related to companies' performances. The network analysis showed only some effectiveness of these reforms in slightly dispersing the web of companies. Using a diff-in-diff approach, we then find in the period considered a slight reduction in the returns of those companies where interlocking directorships were used the most, which confirms our assumption on the perverse effect of ID on company performance in a context prone to shareholder expropriation such as the Italian one.

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The purpose of the present paper is to contribute to the literature on country interlocks by illustrating and analysing the interlocking directorships in the Italian listed companies from 1998 to 2006. We find that over the entire period a high percentage of the Italian listed companies are connected with each other through a very small minority of directors. Such group of interlocking (overwhelmingly male) directors shows a remarkable stability over time with very few entrants and very few exits mainly related to the passing away of the director. We define them for brevity the Lords of the Italian stockmarket. Lords tend to belong to families of directors, with the first five families having more than 100 directorships in nine years. The highest level of connectivity concerns those companies that belong to the MIB 30/S&P-MIB 40 index, the Italian Blue Chips. In particular, practically all the financial Blue Chips are connected with each other through a web of directors continuously from 1998 to 2006. The extent, depth, and stability of the connections among the Italian listed companies, and in particular the main Italian financial companies, raise doubts on the extent of their competitive behaviour.

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