Freedom of Choice between Unitary and Two-Tier Boards:  An Empirical Analysis

Belot, Francois; Ginglinger, Edith; Slovin, Myron B.; Sushka, Marie E.

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Freedom of Choice between Unitary and Two-Tier Boards: An Empirical Analysis

Journal of Financial Economics (JFE), Forthcoming

58 Pages Posted: 3 Feb 2014

See all articles by Francois Belot

Edith Ginglinger

Université Paris-Dauphine, PSL Research University; European Corporate Governance Institute (ECGI)

Marie E. Sushka

Arizona State University

Date Written: October 1, 2013

Abstract

We examine board structure in France, which since 1966 has allowed firms freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. There is enhanced sensitivity of CEO turnover to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest there are gains from allowing freedom of contract about board structure.

Keywords: Board of directors, two-tier board, unitary board, corporate governance, monitoring

JEL Classification: G32; G34

Suggested Citation: Suggested Citation

Belot, Francois and Ginglinger, Edith and Slovin, Myron B. and Sushka, Marie E., Freedom of Choice between Unitary and Two-Tier Boards: An Empirical Analysis (October 1, 2013). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=2389374