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

  • Sandra Cavaco
  • Edouard Challe
  • Patricia Crifo
  • Antoine Rebérioux
  • Gwenael Roudaut

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).

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File URL: http://economix.fr/pdf/dt/2014/WP_EcoX_2014-02.pdf
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Paper provided by University of Paris West - Nanterre la Défense, EconomiX in its series EconomiX Working Papers with number 2014-2.

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Length: 29 pages
Date of creation: 2014
Date of revision:
Handle: RePEc:drm:wpaper:2014-2
Contact details of provider: Postal: 200 Avenue de la République, Bât. G - 92001 Nanterre Cedex
Web page: http://economix.fr
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