The Efficiency View of Corporate Boards: Theory and Evidence

Angelo Baglioni and Luca Colombo

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Abstract: We build a model in which corporate governance allows for the adoption of an institution acting as a mechanism to control agency problems. Our model predicts that the incentive to adopt such an institution is decreasing in ownership concentration and increasing in free cash flow. Testing our theoretical model by means of a sample of 157 Italian listed companies over the period 2004-2007, we find that board composition favors independent members in firms with a large free cash flow, and executive members in firms with high ownership concentration, supporting the view of governance as a way to limit agency costs.

Keywords: Social; Sciences; &; Humanities (search for similar items in EconPapers)
Date: 2011-10-03
Note: View the original document on HAL open archive server: https://hal.science/hal-00737930
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Published in Applied Economics, 2011, 45 (04), pp.497-510. ⟨10.1080/00036846.2011.605764⟩

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Working Paper: The efficiency view of corporate boards: theory and evidence (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00737930

DOI: 10.1080/00036846.2011.605764

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