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

58 Pages Posted: 3 Feb 2014  

Francois Belot

Université de Cergy-Pontoise

Edith Ginglinger

Université Paris Dauphine

Myron B. Slovin

HEC Paris

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

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

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 ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775
France

HOME PAGE: http://sites.google.com/view/edithginglinger/home

Myron B. Slovin

HEC Paris

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

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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