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

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Maria-Andrea Trujillo

CESA School of Business

Alexander Guzmán

CESA School of Business

Neila Caceres

Superintendencia de Sociedades

Date Written: March 2, 2018

Abstract

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

Villalonga, Belen and Trujillo, Maria-Andrea and Guzmán, Alexander and Caceres, Neila, What Are Boards For? Evidence from Closely Held Firms in Colombia (March 2, 2018). 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. Available at SSRN: https://ssrn.com/abstract=2989359 or http://dx.doi.org/10.2139/ssrn.2989359

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

40 West 4th Street
New York, NY NY 10012
United States

María-Andrea Trujillo

CESA School of Business ( email )

Bogota
Colombia

Alexander Guzman

CESA School of Business ( email )

Bogota
Colombia

Neila Caceres

Superintendencia de Sociedades ( email )

Avenida El Dorado No. 51-80
Bogota
Colombia

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