Board independence and operating performance: Analysis on (French) company and individual data
While often criticized, independence remains the ultimate criterion for evaluating board composition, whether for regulators or shareholder activists. In this study, we examine the relationship between board independence and firm operating performance in a panel of French listed companies, paying particular attention to heterogeneity and endogeneity concerns. We take advantage of an original database, with a time-series dimension that can be used to mitigate heterogeneity and dynamic endogeneity issues through GMM estimators. 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. To our knowledge, this is the first paper so far to provide a systematic account on this issue for France. Our main result is to document a significant negative relationship between accounting performance and the independence status (irrespective of the person). This result supports the argument of an information gap suffered by independent board members, as developed by Adams and Ferreira (2007).
|Date of creation:||2014|
|Date of revision:|
|Contact details of provider:|| Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex|
Web page: http://economix.fr
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Verbeek, M.J.C.M. & Nijman, T.E., 1992.
"Incomplete panels and selection bias : A survey,"
1992-7, Tilburg University, Center for Economic Research.
- R Blundell & Steven Bond, .
"Initial conditions and moment restrictions in dynamic panel data model,"
W14&104., Economics Group, Nuffield College, University of Oxford.
- Blundell, Richard & Bond, Stephen, 1998. "Initial conditions and moment restrictions in dynamic panel data models," Journal of Econometrics, Elsevier, vol. 87(1), pages 115-143, August.
- Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
- Blundell, R. & Bond, S., 1995. "Initial Conditions and Moment Restrictions in Dynamic Panel Data Models," Economics Papers 104, Economics Group, Nuffield College, University of Oxford.
- David Roodman, 2007.
"A Note on the Theme of Too Many Instruments,"
125, Center for Global Development.
- Marianne Bertrand & Antoinette Schoar, 2003.
"Managing with Style: The Effect of Managers on Firm Policies,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 118(4), pages 1169-1208.
- Bertrand, Marianne & Schoar, Antoinette, 2003. "Managing With Style: The Effect of Managers on Firm Policies," Working papers 4280-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Ian Gregory-Smith, 2012. "Chief Executive Pay and Remuneration Committee Independence," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 74(4), pages 510-531, 08.
- Adams, Renee & Hermalin, Benjamin E. & Weisbach, Michael S., 2009.
"The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey,"
Working Paper Series
2008-21, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
- Renee B. Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2010. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," Journal of Economic Literature, American Economic Association, vol. 48(1), pages 58-107, March.
- Renée Adams & Benjamin E. Hermalin & Michael S. Weisbach, 2008. "The Role of Boards of Directors in Corporate Governance: A Conceptual Framework and Survey," NBER Working Papers 14486, National Bureau of Economic Research, Inc.
- Arellano, Manuel & Bover, Olympia, 1995.
"Another look at the instrumental variable estimation of error-components models,"
Journal of Econometrics,
Elsevier, vol. 68(1), pages 29-51, July.
- M Arellano & O Bover, 1990. "Another Look at the Instrumental Variable Estimation of Error-Components Models," CEP Discussion Papers dp0007, Centre for Economic Performance, LSE.
- Windmeijer, Frank, 2005. "A finite sample correction for the variance of linear efficient two-step GMM estimators," Journal of Econometrics, Elsevier, vol. 126(1), pages 25-51, May.
- Edith Ginglinger & William Megginson & Timothee Waxin, 2011.
"Employee Ownership, Board Representation, and Corporate Financial Policies,"
- Ginglinger, Edith & Megginson, William & Waxin, Timothée, 2011. "Employee ownership, board representation, and corporate financial policies," Journal of Corporate Finance, Elsevier, vol. 17(4), pages 868-887, September.
- Mathias Siems & Priya Lele, 2006.
"Shareholder Protection: A Leximetric Approach,"
ESRC Centre for Business Research - Working Papers
wp324, ESRC Centre for Business Research.
- Priya P. Lele & Mathias M. Siems, 2007. "Shareholder Protection: A Leximetric Approach," Money Macro and Finance (MMF) Research Group Conference 2006 170, Money Macro and Finance Research Group.
- Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter.
- 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.
- Bhagat, Sanjai & Bolton, Brian, 2008. "Corporate governance and firm performance," Journal of Corporate Finance, Elsevier, vol. 14(3), pages 257-273, June.
- Renée Birgit Adams, 2012. "Governance and the Financial Crisis," International Review of Finance, International Review of Finance Ltd., vol. 12(1), pages 7-38, 03.
- Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 08-96, Wharton School Rodney L. White Center for Financial Research.
- Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
- Masulis, Ronald W. & Wang, Cong & Xie, Fei, 2012. "Globalizing the boardroom—The effects of foreign directors on corporate governance and firm performance," Journal of Accounting and Economics, Elsevier, vol. 53(3), pages 527-554.
- Wintoki, M. Babajide & Linck, James S. & Netter, Jeffry M., 2012. "Endogeneity and the dynamics of internal corporate governance," Journal of Financial Economics, Elsevier, vol. 105(3), pages 581-606.
- Anup Agrawal & Charles R. Knoeber, . "Firm Performance and Mechanisms to Control Agency Problems between Managers and Shareholders (Revision of 29-94)," Rodney L. White Center for Financial Research Working Papers 8-96, Wharton School Rodney L. White Center for Financial Research.
- Coles, Jeffrey L. & Daniel, Naveen D. & Naveen, Lalitha, 2008. "Boards: Does one size fit all," Journal of Financial Economics, Elsevier, vol. 87(2), pages 329-356, February.
- Manuel Arellano & Stephen Bond, 1991.
"Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations,"
Review of Economic Studies,
Oxford University Press, vol. 58(2), pages 277-297.
- Tom Doan, . "RATS program to replicate Arellano-Bond 1991 dynamic panel," Statistical Software Components RTZ00169, Boston College Department of Economics.
- Renée B. Adams & Daniel Ferreira, 2007. "A Theory of Friendly Boards," Journal of Finance, American Finance Association, vol. 62(1), pages 217-250, 02.
- John M. Abowd & Francis Kramarz & Sébastien Roux, 2006. "Wages, Mobility and Firm Performance: Advantages and Insights from Using Matched Worker-Firm Data," Economic Journal, Royal Economic Society, vol. 116(512), pages F245-F285, 06.
When requesting a correction, please mention this item's handle: RePEc:drm:wpaper:2014-2. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Valérie Mignon)
If references are entirely missing, you can add them using this form.