Board independence and operating performance: Analysis on (French) company and individual data

Sandra Cavaco, Edouard Challe, Patricia Crifo, Antoine Reberioux and Gwenael Roudaut
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Gwenael Roudaut: X-DEP-ECO - Département d'Économie de l'École Polytechnique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris, AgroParisTech

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Abstract: While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in (firm) performance equations, thereby controlling for heterogeneity at the firm and individual levels. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).

Keywords: board structure; independent directors; informational gap; GMM estimator; director fixed effects; individual heterogeneity (search for similar items in EconPapers)
Date: 2014-01-27
Note: View the original document on HAL open archive server: https://hal.science/hal-00919408v2
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Board independence and operating performance: analysis on (French) company and individual data (2016)
Working Paper: Board independence and operating performance: Analysis on (French) company and individual data (2016)
Working Paper: Board independence and operating performance: Analysis on (French) company and individual data (2014)
Working Paper: Board independence and operating performance: Analysis on (French) company and individual data (2014)
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