What Are Boards For? Evidence from Closely Held Firms in Colombia
Villalonga, B. , Trujillo, M. , Guzmán, A. and Cáceres, N. (2018), What are Boards for? Evidence from Closely Held Firms in Colombia. Financial Management. Accepted Author Manuscript. . doi:10.1111/fima.12224
66 Pages Posted: 20 Jun 2017 Last revised: 7 Jun 2018
Date Written: March 2, 2018
Using a large survey database on the corporate governance practices of privately held firms, we investigate why firms have boards, and how that choice, and the balance of power among the board, controlling shareholders, and minority shareholders impact the tradeoffs between control, liquidity, and growth, and ultimately, firm performance. We find that the probability of having a board increases with the number of shareholders and in family firms. When the preferences of controlling and minority shareholders diverge, as with respect to capital structure and dividend policy, boards support controlling shareholders’ decisions, thereby exacerbating the agency conflict between the two groups of shareholders.
Keywords: Boards, Closely Held Firms, Family Firms, Corporate Governance, Agency Theory
JEL Classification: D22, D23, G32, G34, G35, K22
Suggested Citation: Suggested Citation