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Lessons from The French Exception: How Firms Choose Between Unitary and Dual Boards

Belot, François; Ginglinger, Edith; Slovin, Myron; Sushka, Marie (2012), Lessons from The French Exception: How Firms Choose Between Unitary and Dual Boards, 2012 FMA European Conference, 2012-06, Istanbul, TURKEY

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Type
Communication / Conférence
Date
2012
Conference title
2012 FMA European Conference
Conference date
2012-06
Conference city
Istanbul
Conference country
TURKEY
Metadata
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Author(s)
Belot, François
Théorie économique, modélisation et applications [THEMA]
Ginglinger, Edith
Dauphine Recherches en Management [DRM]
Slovin, Myron
Institut des hautes études commerciales (Carthage, Tunisie) [IHEC]
Sushka, Marie
Abstract (EN)
Many governance reform proposals focus on strengthening board monitoring. In contrast, Adams and Ferreira (2007) and Harris and Raviv (2008) conclude that a passive board is often optimal. We examine determinants of board structure choice in France, where firms are free to choose between a unitary (passive) board and a dual (monitoring) board. We find firms with greater asymmetric information are likely to adopt a unitary board. Firms with a high potential for private benefit extraction are likely to adopt dual boards. Firms well monitored by financial market and institutional forces are less likely to have dual boards. Our results imply that freedom of contract about board structure is valuable for shareholders.
Subjects / Keywords
monitoring; supervisory board; corporate governance; dual board; management board; unitary board; Board of directors
JEL
G34 - Mergers; Acquisitions; Restructuring; Corporate Governance
G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill