This article analyses the effects of board composition on the behavior of a sample of 114 Italian local public utilities, for which information about 1630 directors during 1994–2004 has been collected. This period is particularly interesting because of the legal changes that forced many firms to alter their juridical form and accommodated the entrance of private investors. We investigate whether board size and/or board composition do affect decisions about employment and how they ultimately impact performance. Our main findings indicate that politically connected directors, who dominate boards of directors in Italian public utilities, exert a positive and significant effect on employment, and have a negative impact on performance.
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