Freedom of choice between unitary and two-tier boards: An empirical analysis

François Belot; Edith Ginglinger; Myron B. Slovin; Marie Sushka

doi:10.1016/j.jfineco.2014.02.011

Freedom of choice between unitary and two-tier boards: An empirical analysis

François Belot, Edith Ginglinger, Myron B. Slovin, Marie Sushka

Finance

Research output: Contribution to journal › Article › peer-review

38 Scopus citations

Abstract

We examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. Chief executive officer turnover is more sensitive to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest that gains result from allowing freedom of contract about board structure.

Original language	English (US)
Pages (from-to)	364-385
Number of pages	22
Journal	Journal of Financial Economics
Volume	112
Issue number	3
DOIs	https://doi.org/10.1016/j.jfineco.2014.02.011
State	Published - Jun 2014

Keywords

Board of directors
Corporate governance
Monitoring
Two-tier board
Unitary board

ASJC Scopus subject areas

Accounting
Finance
Economics and Econometrics
Strategy and Management

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10.1016/j.jfineco.2014.02.011

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title = "Freedom of choice between unitary and two-tier boards: An empirical analysis",

abstract = "We examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. Chief executive officer turnover is more sensitive to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest that gains result from allowing freedom of contract about board structure.",

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T2 - An empirical analysis

AU - Belot, François

AU - Ginglinger, Edith

AU - Slovin, Myron B.

AU - Sushka, Marie

PY - 2014/6

Y1 - 2014/6

N2 - We examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. Chief executive officer turnover is more sensitive to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest that gains result from allowing freedom of contract about board structure.

AB - We examine board structure in France, which since 1966 has allowed firms the freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. Chief executive officer turnover is more sensitive to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest that gains result from allowing freedom of contract about board structure.

KW - Board of directors

KW - Corporate governance

KW - Monitoring

KW - Two-tier board

KW - Unitary board

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Freedom of choice between unitary and two-tier boards: An empirical analysis

Abstract

Keywords

ASJC Scopus subject areas

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