The Journal of Finance

External Networking and Internal Firm Governance

Published: 01/17/2012   |   DOI: 10.1111/j.1540-6261.2011.01706.x

CESARE FRACASSI, GEOFFREY TATE

We use panel data on S&P 1500 companies to identify external network connections between directors and CEOs. We find that firms with more powerful CEOs are more likely to appoint directors with ties to the CEO. Using changes in board composition due to director death and retirement for identification, we find that CEO‐director ties reduce firm value, particularly in the absence of other governance mechanisms to substitute for board oversight. Moreover, firms with more CEO‐director ties engage in more value‐destroying acquisitions. Overall, our results suggest that network ties with the CEO weaken the intensity of board monitoring.

Barbarians at the Store? Private Equity, Products, and Consumers

Published: 04/11/2022   |   DOI: 10.1111/jofi.13134

CESARE FRACASSI, ALESSANDRO PREVITERO, ALBERT SHEEN

We investigate the effects of private equity firms on product markets using price and sales data for an extensive number of consumer products. Following a private equity deal, target firms increase retail sales of their products 50% more than matched control firms. Price increases—roughly 1% on existing products—do not drive this growth; the launch of new products and geographic expansion do. Competitors reduce their product offerings and marginally raise prices. Cross‐sectional results on target firms, private equity firms, the economic environment, and product categories suggest that private equity generates growth by easing financial constraints and providing managerial expertise.