Board of Directors’ “Convexification” and Corporate Results: Recent Evidence from Italy under a Linear/PLS Approach

We investigate how the attributes of the board of directors are related to results in the case of top capitalised companies listed on “Borsa Italiana” (2014 to 2016). Consistently with an integrated (agency and resource/stewardship) framework, we provide the assumptions and main statistics, then execute the econometric modelling: the composition and function board’s profiles are used as explanatory variables and the firms’ performance as response variable. In a first phase, we verified the possible 'role' of the key characteristics with accounting and economic performances (OLS) even controlling for the ability to create additional value. In a second phase, we adopted – for the first time in this issue – a SEM approach along a Partial Least Squares path (PLS: a variance-based model increasingly applied in business and social sciences), considering “performance” and “organisational convexity” as the latent operationalised variables. Interesting findings emerged from the research (negative influence of the number of meetings and committees, % of independent members and age of CEO; vs positive influence of external offices, CEO duality and presence of women in the boardroom), allowing new and partly counterintuitive understanding about the governance / performance linkage. In the context of the late post-crisis, our latent variables appear negatively related: corporate performance is higher in presence of an organisational concavity inspired to efficiency-oriented synthesis and concentration/centralisation of competencies, with a curved-in yet resilient, svelte and effective array, rather than a more structured one (that is: deconvexification would provide value), suggesting a shift from the general market-to-board approach to a specific board-to-market approach characterised by strong and influential leadership, interests alignment, high trust and clear commitment.