Lessons from The French Exception: How Firms Choose Between Unitary and Dual Boards
DeweyOrganisation et finances d'entreprise
Sujetmonitoring; supervisory board; corporate governance; dual board; management board; unitary board; Board of directors
JEL codeG.G3.G34; G.G3.G32
Conference name2012 FMA European Conference
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1098 Théorie économique, modélisation et applications [THEMA]
1032 Dauphine Recherches en Management [DRM]
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.
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