Do Friendly Boards Have an Influence on Corporate Financing Policy? Evidence from French-Listed Firms
27 Pages Posted: 9 Nov 2016
Date Written: october 25, 2016
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
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