Lessons from The French Exception: How Firms Choose Between Unitary and Dual Boards

François Belot, Edith Ginglinger, Myron Slovin and Marie Sushka
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François Belot: THEMA - Théorie économique, modélisation et applications - UPN - Université Paris Nanterre - UCP - Université de Cergy Pontoise - Université Paris-Seine - CNRS - Centre National de la Recherche Scientifique
Myron Slovin: IHEC - Institut des hautes études commerciales (Carthage, Tunisie) - UCAR - Université de Carthage (Tunisie)
Marie Sushka: AUTRES

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Abstract: Many governance reform proposals focus on strengthening board monitoring. In contrast, Adams and Ferreira (2007) and Harris and Raviv (2008) conclude that a passive board is often optimal. We examine determinants of board structure choice in France, where firms are free to choose between a unitary (passive) board and a dual (monitoring) board. We find firms with greater asymmetric information are likely to adopt a unitary board. Firms with a high potential for private benefit extraction are likely to adopt dual boards. Firms well monitored by financial market and institutional forces are less likely to have dual boards. Our results imply that freedom of contract about board structure is valuable for shareholders.

Keywords: monitoring; supervisory board; corporate governance; dual board; management board; unitary board; Board of directors (search for similar items in EconPapers)
Date: 2012-06
Note: View the original document on HAL open archive server: https://hal.science/hal-01637565v1
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Published in 2012 FMA European Conference, Jun 2012, Istanbul, Turkey

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01637565

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