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 global sample of 93,697 firm-year observation, 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 indicated by Tobin’s Q and ROA. We interpret these lingering effects as military directors possess social capital but lack business expertise. Our results are robust to a matched sample, a lagged difference model, a two-step dynamic GMM model and to the control of country, industry and year fixed effects.
|Number of pages||26|
|Journal||Journal of International Financial Markets, Institutions and Money|
|Early online date||7 Jan 2020|
|Publication status||E-pub ahead of print - 7 Jan 2020|
- military directors
- board directors
- firm performance