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

Jiafu An; Tinghua Duan; Wenxuan Hou; Xianda Liu

doi:10.1016/j.intfin.2019.101172

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

Jiafu An, Tinghua Duan, Wenxuan Hou^* (Corresponding Author), Xianda Liu

^*Corresponding author for this work

Accountancy & Finance, Finance

Research output: Contribution to journal › Article › peer-review

5 Citations (Scopus)

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.

Original language	English
Article number	101172
Number of pages	26
Journal	Journal of International Financial Markets, Institutions and Money
Volume	64
Early online date	7 Jan 2020
DOIs	https://doi.org/10.1016/j.intfin.2019.101172
Publication status	Published - Jan 2020

Keywords

War
Military directors
Board directors
Firm performance

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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{\textquoteright}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",

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N2 - 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.

AB - 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.

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KW - Military directors

KW - Board directors

KW - Firm performance

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JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

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

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Keywords

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