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.
|Journal||Journal of International Financial Markets, Institutions and Money|
|Publication status||Published - Jan 2020|
- Board directors
- Firm performance
- Military directors