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Board systems, employee representation, and neo‐institutional theory: The moderating effect of economic freedom on corporate boards and financial performance

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  • Naz Sayari
  • Bill Marcum

Abstract

This study assesses the relative financial performance of firms operating in an environment in which economic freedom is protected by effective institutions. To do this, we examine the moderating effect of economic freedom on the relationship between board structure and financial performance. Using longitudinal data across 30 European countries, we find that firms with a one‐tier board consistently outperform those with a two‐tier board, but the relative underperformance of two‐tier boards is partially mitigated by the inclusion of employee representatives. The positive influence of employee representatives on the performance of firms with two‐tier boards is bolstered by greater economic freedom.

Suggested Citation

  • Naz Sayari & Bill Marcum, 2022. "Board systems, employee representation, and neo‐institutional theory: The moderating effect of economic freedom on corporate boards and financial performance," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(8), pages 3931-3952, December.
    • Handle: RePEc:wly:mgtdec:v:43:y:2022:i:8:p:3931-3952
    DOI: 10.1002/mde.3638
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