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Why do firms have boards?

  • Bennedsen, Morten

    (Department of Economics, Copenhagen Business School)

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    In a world where corporate boards are not required by law, I identify a governance and a distribute motive for board establishment and board composition. I investigate the presence of these motives in a sample of 23.000+ closely held corporations. Board frequency increases with more owners, if control is diluted and in larger firms. Given firms have a board, non-controlling owners are more likely to be on the board when controlling owners are more powerful. Finally, consistent with an equilibrium interpretation of strategic board establishment, I find little effect of the presence of boards on performance. I conclude that both motives are significant and discuss related corporate governance implications.

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    File URL: http://openarchive.cbs.dk/cbsweb/handle/10398/7624
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    Paper provided by Copenhagen Business School, Department of Economics in its series Working Papers with number 03-2002.

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    Length: 42 pages
    Date of creation: 01 Mar 2002
    Date of revision:
    Handle: RePEc:hhs:cbsnow:2002_003
    Contact details of provider: Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
    Phone: 38 15 25 75
    Fax: 38 15 34 99
    Web page: http://www.cbs.dk/departments/econ/
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