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Board independence and operating performance: analysis on (French) company and individual data

Author

Listed:
  • Sandra Cavaco
  • Edouard Challe
  • Patricia Crifo
  • Antoine Rebérioux
  • Gwenaël Roudaut

Abstract

This article studies the relationship between board independence and firm operating performance in French listed companies. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues. In addition, this database can be disaggregated at the individual (director) level. This design enables us to introduce firm fixed effects and individual fixed effects in firm performance equations, thereby controlling for heterogeneity at the firm and individual levels. Our main result is to document a significant negative relationship between independence and accounting performance. This result suggests that, in the French context, the costs of independence (i.e. the informational gap supported by independent directors compared to insiders and affiliated directors) outweigh the benefits of independence (i.e. the reduction in agency costs).

Suggested Citation

  • Sandra Cavaco & Edouard Challe & Patricia Crifo & Antoine Rebérioux & Gwenaël Roudaut, 2016. "Board independence and operating performance: analysis on (French) company and individual data," Applied Economics, Taylor & Francis Journals, vol. 48(52), pages 5093-5105, November.
    • Handle: RePEc:taf:applec:v:48:y:2016:i:52:p:5093-5105
    DOI: 10.1080/00036846.2016.1170936
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    Cited by:

    1. Xavier Hollandts & Nicolas Aubert, 2019. "La gouvernance salariale : contribution de la représentation des salariés à la gouvernance d’entreprise," Revue Finance Contrôle Stratégie, revues.org, vol. 22(1), pages 63-88, March.
    2. Andrew E. Hansen-Addy & Davide M. Parrilli & Ishmael Tingbani, 2024. "The impact of trade facilitation on African SMEs’ performance," Small Business Economics, Springer, vol. 62(1), pages 105-131, January.
    3. Shivan Sarpal, 2018. "Does Endogeneity in Causal Relationships Matter: A Case of Board Independence and Firm’s Market Valuation," Emerging Economy Studies, International Management Institute, vol. 4(1), pages 19-39, May.
    4. Majid Jamal Khan & Faiza Saleem & Shahab Ud Din & Muhammad Yar Khan, 2024. "Nexus between boardroom independence and firm financial performance: evidence from South Asian emerging market," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 11(1), pages 1-10, December.
    5. Patricia Crifo & Antoine Rebérioux, 2016. "Corporate governance and corporate social responsibility: a typology of OECD countries," Post-Print halshs-01591993, HAL.
    6. Aziz Jaafar & Lynn Hodgkinson & Mao-Feng Kao, 2019. "Ownership Structure, Board of Directors and Firm Performance: Evidence from Taiwan," Working Papers 19011, Bangor Business School, Prifysgol Bangor University (Cymru / Wales).
    7. Serghei PETIGHIN, 2024. "Shifting Focus: The Role Of Environmental, Social, And Governance Factors In Investment Policy During A Pandemic," Eastern European Journal for Regional Studies (EEJRS), Center for Studies in European Integration (CSEI), Academy of Economic Studies of Moldova (ASEM), vol. 10(2), pages 85-96, December.
    8. Patricia Crifo & Elena Escrig-Olmedo & Nicolas Mottis, 2019. "Corporate Governance as a Key Driver of Corporate Sustainability in France: The Role of Board Members and Investor Relations," Journal of Business Ethics, Springer, vol. 159(4), pages 1127-1146, November.
    9. Ozcan Isik & Umit Firat Tasgin, 2017. "Profitability and Its Determinants in Turkish Manufacturing Industry: Evidence from a Dynamic Panel Model," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 9(8), pages 66-75, August.
    10. Liu, Jiasong & Zhu, Jingyi, 2024. "The impact of foreign participation on risk-taking in Chinese commercial banks: The co-governance role of equity checks and foreign supervision," Pacific-Basin Finance Journal, Elsevier, vol. 85(C).
    11. Mete KARAYEL & Mesut DOGAN, 2016. "Board Composition and Firm Performance: Evidence from BIST 100 Companies in Turkey," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 2, pages 33-40.

    More about this item

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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