Do Friendly Boards Have an Influence on Corporate Financing Policy? Evidence from French-Listed Firms

27 Pages Posted: 9 Nov 2016

See all articles by Cedric Van Appelghem

Cedric Van Appelghem

Université Paris II - Panthéon-Assas

Véronique Blum

CERAG UMR CNRS 5820

Aurelie Sannajust

University of Saint Etienne

Samir Trabelsi

Brock University - Accounting

Date Written: october 25, 2016

Abstract

The paper empirically investigates the association between friendly boards and corporate financing policy. A friendly board can be defined as a board on which some directors are socially tied to the CEO. In the paper, we consider that a director is socially tied to the CEO when he belongs to the same alumni networks as the CEO. We use a unique, hand-collected dataset. It is related to 78 French-listed firms belonging to the SBF 120 index between 2007 and 2011. Our results show that board friendliness toward the CEO increases firm’s leverage. Further tests show that the initial relationship depends on ownership concentration. Taken together, our results suggest that it is necessary for researchers to have a contingent vision of the effects of board composition on corporate governance.

Keywords: CEO Social Ties, Leverage, Board of Directors, Corporate Governance Contingencies, Agency Theory, Resource Dependence Theory

JEL Classification: G30, G32, G34

Suggested Citation

Van Appelghem, Cedric and Blum, Véronique and Sannajust, Aurelie and Trabelsi, Samir, Do Friendly Boards Have an Influence on Corporate Financing Policy? Evidence from French-Listed Firms (october 25, 2016). Available at SSRN: https://ssrn.com/abstract=2866572 or http://dx.doi.org/10.2139/ssrn.2866572

Cedric Van Appelghem

Université Paris II - Panthéon-Assas ( email )

12 place du Pantheon
Paris cedex 06, 75231
France

Véronique Blum

CERAG UMR CNRS 5820 ( email )

Grenoble
France

Aurelie Sannajust

University of Saint Etienne ( email )

Rue Tréfilerie
Saint-Etienne, 42000
France

Samir Trabelsi (Contact Author)

Brock University - Accounting ( email )

St. Catharines, Ontario L2S 3A1
Canada

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