Dominant Shareholders, Corporate Boards and Corporate Value: A Cross-Country Analysis

131 Pages Posted: 10 Mar 2006

See all articles by Jay Dahya

Jay Dahya

Zicklin School of Business, Baruch College - The City University of New York

Orlin Dimitrov

York University - Schulich School of Business

John J. McConnell

Purdue University

Date Written: September 2006

Abstract

We investigate the relation between corporate value and the proportion of the board made up of independent directors in 799 firms with a dominant shareholder across 22 countries. We find a positive relation, especially in countries with weak legal protection for shareholders. The findings suggest that a dominant shareholder, were he so inclined, could offset, at least in part, the documented value discount associated with weak country-level shareholder protection by appointing an 'independent' board. The cost to the dominant shareholder of doing so is the loss in perquisites associated with being a dominant shareholder. Thus, not all dominant shareholders will choose independent boards.

Suggested Citation

Dahya, Jay and Dimitrov, Orlin and McConnell, John J., Dominant Shareholders, Corporate Boards and Corporate Value: A Cross-Country Analysis (September 2006). ECGI - Finance Working Paper No. 99/2005. Available at SSRN: https://ssrn.com/abstract=887383 or http://dx.doi.org/10.2139/ssrn.887383

Jay Dahya

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Orlin Dimitrov

York University - Schulich School of Business ( email )

4700 Keele Street
Toronto, Ontario M3J 1P3
Canada

John J. McConnell (Contact Author)

Purdue University ( email )

MGMT, KRAN
403 West State St.
West Lafayette, IN 47907-2056
United States
765-494-5910 (Phone)
765-494-7863 (Fax)

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