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Freedom of Choice between Unitary and Two-Tier Boards: An Empirical Analysis

  • Belot, François
  • Ginglinger, Edith
  • Slovin, Myron B.
  • Sushka, Marie E.

We examine board structure in France, which since 1966 has allowed firms freedom to choose between unitary and two-tier boards. We analyze how this choice relates to characteristics of the firm and its environment. Firms with severe asymmetric information tend to opt for unitary boards; firms with a potential for private benefits extraction tend to adopt two-tier boards. There is enhanced sensitivity of CEO turnover to performance at firms with two-tier boards, indicating greater monitoring. Our results are broadly consistent with the Adams and Ferreira (2007) model and suggest there are gains from allowing freedom of contract about board structure.

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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/12816.

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Date of creation: Jun 2014
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Publication status: Published in Journal of Financial Economics, 2014, Vol. 112, no. 3
Handle: RePEc:dau:papers:123456789/12816
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