La proximité entre le dirigeant et les administrateurs a-t-elle un impact sur le coût des fonds propres ?

Cédric Van Appelghem and Pascal Nguyen

ACCRA, 2021, vol. 27, issue 1, 111-158

Abstract: The education of the French elite within a restricted circle of prestigious schools leads to strong social ties inside the boardroom. This paper examines the impact of those ties on a firm?s cost of equity. Our results show that the strength of CEO-directors ties is associated with a higher cost of equity due to the risk of managerial opportunism facilitated by weaker board monitoring. This effect is exacerbated when the CEO is firmly entrenched due to a longer tenure or dual role as chairman of the board. It is however attenuated when other control mechanisms can substitute for a deficient board, such as the presence of a large controlling shareholder or extensive analysts following. Overall, our results highlight the cost arising from the existence of social networks in the boardroom.

Keywords: Social networks; opportunism; agency conflicts; monitoring; cost of capital (search for similar items in EconPapers)
Date: 2021
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