Do CEO-board ties affect the firm’s cost of equity?

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 ()
Additional contact information
Cédric van Appelghem: UEVE - Université d'Évry-Val-d'Essonne, LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]
Pascal Nguyen: MRM - Montpellier Research in Management - UPVM - Université Paul-Valéry - Montpellier 3 - UPVD - Université de Perpignan Via Domitia - Groupe Sup de Co Montpellier (GSCM) - Montpellier Business School - UM - Université de Montpellier

Post-Print from HAL

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 induced by weaker board monitoring. This effect is amplified when the CEO is firmly entrenched due a longer tenure or dual role as chairman of the board. It is however moderated 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: Cost of capital; Monitoring; Agency conflicts; Opportunism; Social networks; Opportunisme; Conflits d’agence; Relations sociales; Contrôle disciplinaire; Coût du capital (search for similar items in EconPapers)
Date: 2021-01
References: Add references at CitEc
Citations:

Published in Comptabilité Contrôle Audit / Accounting Auditing Control, 2021, 27 (1), pp.111-158. ⟨10.3917/cca.271.0111⟩

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02504331

DOI: 10.3917/cca.271.0111

Access Statistics for this paper

More papers in Post-Print from HAL
Bibliographic data for series maintained by CCSD ().