Why do boards exist? Governance design in the absence of corporate law

Mike Burkart, Salvatore Miglietta and Charlotte Ostergaard

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We study under which circumstances firms choose to install boards and their roles in a historical setting in which neither boards nor their duties are mandated by law. Boards arise in firms with large, heterogeneous shareholder bases. We propose that an important role of boards is to mediate between heterogeneous shareholders with divergent interests. Voting restrictions are common and ensure that boards are representative and not captured by large blockholders. Boards are given significant powers to both mediate and monitor management, and these roles are intrinsically linked.

JEL-codes: D23 G30 K20 N80 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2023-05-01
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Published in Review of Financial Studies, 1, May, 2023, 36(5), pp. 1788-1836. ISSN: 0893-9454

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