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, Xianda Liu

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Abstract / Description of output

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.

Original language	English
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	E-pub ahead of print - 7 Jan 2020

Keywords / Materials (for Non-textual outputs)

war
military directors
board directors
firm performance

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10.1016/j.intfin.2019.101172

AnEtalJIFMIM2019TheLegacyOfWarsAccepted author manuscript, 864 KBLicence: Creative Commons: Attribution-NonCommercial-NoDerivatives (CC BY-NC-ND)

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title = "The legacy of wars around the world: Evidence from military directors",

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 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{\textquoteright}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.",

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T2 - Evidence from military directors

AU - An, Jiafu

AU - Duan, Tinghua

AU - Hou, Wenxuan

AU - Liu, Xianda

PY - 2020/1/7

Y1 - 2020/1/7

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 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.

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 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.

KW - war

KW - military directors

KW - board directors

KW - firm performance

UR - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3313348

U2 - 10.1016/j.intfin.2019.101172

DO - 10.1016/j.intfin.2019.101172

M3 - Article

SN - 1042-4431

VL - 64

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

ER -

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

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