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

^*Corresponding author for this work

Research output: Journal Publications › Journal Article (refereed) › peer-review

3 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
Journal	Journal of International Financial Markets, Institutions and Money
Volume	64
DOIs	https://doi.org/10.1016/j.intfin.2019.101172
Publication status	Published - Jan 2020
Externally published	Yes

Keywords

Board directors
Firm performance
Military directors
War

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10.1016/j.intfin.2019.101172

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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 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.",

keywords = "Board directors, Firm performance, Military directors, War",

author = "Jiafu AN and Tinghua DUAN and Wenxuan HOU and Xianda LIU",

year = "2020",

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journal = "Journal of International Financial Markets, Institutions and Money",

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AU - AN, Jiafu

AU - DUAN, Tinghua

AU - HOU, Wenxuan

AU - LIU, Xianda

PY - 2020/1

Y1 - 2020/1

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.

KW - Board directors

KW - Firm performance

KW - Military directors

KW - War

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DO - 10.1016/j.intfin.2019.101172

M3 - Journal Article (refereed)

AN - SCOPUS:85077982819

SN - 1042-4431

VL - 64

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

M1 - 101172

ER -

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

Abstract

Keywords

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