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Lessons from The French Exception: How Firms Choose Between Unitary and Dual Boards

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  • Sushka, Marie
  • Slovin, Myron
  • Ginglinger, Edith
  • Belot, François

Abstract

Many governance reform proposals focus on strengthening board monitoring. In contrast, Adams and Ferreira (2007) and Harris and Raviv (2008) conclude that a passive board is often optimal. We examine determinants of board structure choice in France, where firms are free to choose between a unitary (passive) board and a dual (monitoring) board. We find firms with greater asymmetric information are likely to adopt a unitary board. Firms with a high potential for private benefit extraction are likely to adopt dual boards. Firms well monitored by financial market and institutional forces are less likely to have dual boards. Our results imply that freedom of contract about board structure is valuable for shareholders.

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Bibliographic Info

Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/9554.

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Date of creation: Jun 2012
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Handle: RePEc:dau:papers:123456789/9554

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Keywords: Board of directors; dual board; unitary board; corporate governance; monitoring; supervisory board; management board;

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