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Freedom of choice between unitary and two-tier boards: An empirical analysis

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

Abstract

We examine board structure in France, which since 1966 has allowed firms the 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. Chief executive officer turnover is more sensitive 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 that gains result from allowing freedom of contract about board structure.

Suggested Citation

  • Belot, François & Ginglinger, Edith & Slovin, Myron B. & Sushka, Marie E., 2014. "Freedom of choice between unitary and two-tier boards: An empirical analysis," Journal of Financial Economics, Elsevier, vol. 112(3), pages 364-385.
    • Handle: RePEc:eee:jfinec:v:112:y:2014:i:3:p:364-385
    DOI: 10.1016/j.jfineco.2014.02.011
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    More about this item

    Keywords

    Board of directors; Two-tier board; Unitary board; Corporate governance; Monitoring;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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