Two Essays in Corporate Governance

Annalisa Tonetto, PhD
ownership, boards, network analysis, indexing, corporate governance, institutional investors, financial performance, policy evaluation, busy directors, gender quotas, synthetic controls, ESG

Abstract :

Corporate Governance Networks and Financial Performance: I investigate the impact of two different corporate governance network connectedness measures on financial performance of firms. I consider both ownership connectedness, defined as the number of connections to other firms through common shareholders, and boardroom connectedness, that is the number of connections to other firms through common directors. In panel regressions, I find that firms with higher shareholder overlap but lower directors overlap with other firms have higher ROA. These relations are statistically significant and economically meaningful:  ceteris paribus, 200 additional common institutional shareholders have a +0.7% impact on ROA, while one additional common female director has a -0.6% impact on ROA. Using changes in the Russell 1000 and Russell 2000 indices constituents as a source of exogenous variation in ownership connectedness, I establish that the relation for ownership connectedness is causal: higher institutional shareholder connectedness imply higher ROA. Firms benefit from sharing institutional investors. In fact, given their size and scope, they act like a super entity between the firms they have in their portfolios, facilitating the exchange of best practices among connected firms.  On the other hand, I provide evidence that female directors sitting on multiple boards adversely affect firm performance, most likely because of the overboarding issue associated with women sitting on US boards.

Busy Female Directors: In the last 20 years many countries have introduced ad hoc regulations to increase gender diversity in boardrooms.  The empirical evidences about the consequences of such regulations on firm performance are mixed. In this paper I investigate the impact of mandatory gender quotas policies on the environmental and social (ES) performance of firms by studying the case of California which was the first US state to impose a binding gender quota on boards. In September 2018 a quota for corporate boards was passed (CA Senate Bill 826) requiring quotas on female board members forall publicly held firms headquartered in the state starting from the end of 2019.  I document an increase in firms with overboarded female directors, following the introduction of CA Senate Bill. Moreover, the causal effect of quota introduction on directors’ busyness is tested using Synthetic Control Methodology. In panel regressions, I find that overboarded female directors are associated to lower ES rating. My findings shed lights on the unintended consequences of gender quota regulations. The expected long term policy implication is a decrease of this negative effect, as there will be more women in the corporate directors market in the next years. More importantly, an efficient policy would have additionally introduced a cap to the number of multiple-directorships.



Publication date of the thesis

Thesis committee

Supervisor: Gianfranco Gianfrate, EDHEC Business School 

External reviewer: Nadya Malenko, University of Michigan's Ross School of Business 

Other committee members: Emmanuel Jurczenko and Enrique Schroth, EDHEC Business School