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La proximité entre le dirigeant et les administrateurs a-t-elle un impact sur le coût des fonds propres ?

Author

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  • Cédric Van Appelghem
  • Pascal Nguyen

Abstract

The education of the French elite within a restricted circle of prestigious schools leads to strong social ties inside the boardroom. This paper examines the impact of those ties on a firm?s cost of equity. Our results show that the strength of CEO-directors ties is associated with a higher cost of equity due to the risk of managerial opportunism facilitated by weaker board monitoring. This effect is exacerbated when the CEO is firmly entrenched due to a longer tenure or dual role as chairman of the board. It is however attenuated when other control mechanisms can substitute for a deficient board, such as the presence of a large controlling shareholder or extensive analysts following. Overall, our results highlight the cost arising from the existence of social networks in the boardroom.

Suggested Citation

  • Cédric Van Appelghem & Pascal Nguyen, 2021. "La proximité entre le dirigeant et les administrateurs a-t-elle un impact sur le coût des fonds propres ?," ACCRA, Association francophone de comptabilité, vol. 27(1), pages 111-158.
    • Handle: RePEc:cai:accafc:cca_271_0111
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