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Company Performance and the Two-Tier Board Structure: Empirical Evidence from France

  • Ellen Rouyer

    (Department of International Business, Tung Hai University, Taiwan PhD Program in Business Feng Chia University, Taiwan)

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    This study's objective is to assess the impact of board structure on company performance in France, where companies are allowed to choose between a one-tier or a two-tier board structure and to verify the specificities of companies with a two-tier board. To verify the specificities of companies with a two-tier board, we analyze 250 large publicly traded companies and find that the two-tier structure does have a significant impact on long-term performance, measured by Tobin's Q, yet no impact on cash holdings. Supervisory board size and the percentage of shares controlled by supervisors also have a significant impact on performance. Our findings are consistent with agency theory.

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    Article provided by College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan in its journal International Journal of Business and Economics.

    Volume (Year): 12 (2013)
    Issue (Month): 1 (June)
    Pages: 45-58

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    Handle: RePEc:ijb:journl:v:12:y:2013:i:1:p:45-58
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    1. Dittmar, Amy & Mahrt-Smith, Jan, 2007. "Corporate governance and the value of cash holdings," Journal of Financial Economics, Elsevier, vol. 83(3), pages 599-634, March.
    2. Cheng, Shijun, 2008. "Board size and the variability of corporate performance," Journal of Financial Economics, Elsevier, vol. 87(1), pages 157-176, January.
    3. Bhagat, Sanjai & Bolton, Brian, 2008. "Corporate governance and firm performance," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 257-273, June.
    4. Heckman, James J, 1979. "Sample Selection Bias as a Specification Error," Econometrica, Econometric Society, vol. 47(1), pages 153-61, January.
    5. Mikkelson, Wayne H. & Partch, M. Megan, 2003. "Do Persistent Large Cash Reserves Hinder Performance?," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 38(02), pages 275-294, June.
    6. Yermack, David, 1996. "Higher market valuation of companies with a small board of directors," Journal of Financial Economics, Elsevier, vol. 40(2), pages 185-211, February.
    7. Jarrad Harford & Kai Li, 2007. "Decoupling CEO Wealth and Firm Performance: The Case of Acquiring CEOs," Journal of Finance, American Finance Association, vol. 62(2), pages 917-949, 04.
    8. Jensen, Michael C, 1986. "Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers," American Economic Review, American Economic Association, vol. 76(2), pages 323-29, May.
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