Lessons from the French Exception: How Firms Choose between Unitary and Dual Boards

44 Pages Posted: 9 Oct 2012

See all articles by Francois Belot

Francois Belot

Université de Cergy-Pontoise

Edith Ginglinger

Université Paris-Dauphine, PSL Research University

Myron B. Slovin

Louisiana State University, Baton Rouge - Department of Finance; HEC Paris

Marie E. Sushka

Arizona State University

Date Written: June 6, 2012

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: Board of directors, dual board, unitary board, corporate governance, monitoring, supervisory board, management board

JEL Classification: G32, G34

Suggested Citation

Belot, Francois and Ginglinger, Edith and Slovin, Myron B. and Sushka, Marie E., Lessons from the French Exception: How Firms Choose between Unitary and Dual Boards (June 6, 2012). 29th International Conference of the French Finance Association (AFFI) 2012. Available at SSRN: https://ssrn.com/abstract=2083643 or http://dx.doi.org/10.2139/ssrn.2083643

Francois Belot

Université de Cergy-Pontoise ( email )

THEMA
33 boulevard du Port
Cergy-Pontoise Cedex, 95011
France
+33 1 34 25 62 33 (Fax)

Edith Ginglinger (Contact Author)

Université Paris-Dauphine, PSL Research University ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

Myron B. Slovin

Louisiana State University, Baton Rouge - Department of Finance ( email )

2163 CEBA
Baton Rouge, LA 70803
United States
480-820-5949 (Phone)

HEC Paris ( email )

France
33146476045 (Phone)

Marie E. Sushka

Arizona State University ( email )

W. P. Carey School of Business
PO Box 873906
Tempe, AZ 85287-3906
United States
602-965-3131 (Phone)
602-965-8539 (Fax)

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