Why Do Boards Exist? Governance Design in the Absence of Corporate Law
Mike Burkart (),
Salvatore Miglietta and
Charlotte Ostergaard ()
No 12147, CEPR Discussion Papers from C.E.P.R. Discussion Papers
We study how owners trade off the costs and benefits of establishing a board in a historical setting, where boards are optional and authority over corporate decisions can be freely allocated across the general meeting, the board, and management. We find that informed owners and boards are substitutes, and that boards exist in firms most prone to collective action problems. Boards monitor, advise, and mediate among shareholders, and these different roles entail different allocations of authority. Boards also arise to balance the need for small shareholder protection with the need to curb managerial discretion.
Keywords: authority allocation; Boards; corporate governance; private contracting (search for similar items in EconPapers)
JEL-codes: D23 G3 K2 N80 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-bec, nep-cfn and nep-law
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