The efficiency view of corporate boards: theory and evidence
- 1 February 2013
- journal article
- research article
- Published by Taylor & Francis Ltd in Applied Economics
- Vol. 45 (4), 497-510
- https://doi.org/10.1080/00036846.2011.605764
Abstract
We build a model in which corporate governance allows for the adoption of an institution acting as a mechanism to control agency problems. Our model predicts that the incentive to adopt such an institution is decreasing in ownership concentration and increasing in free cash flow. Testing our theoretical model by means of a sample of 157 Italian listed companies over the period 2004–2007, we find that board composition favours independent members in firms with a large free cash flow, and executive members in firms with high ownership concentration, supporting the view of governance as a way to limit agency costs.Keywords
Other Versions
This publication has 13 references indexed in Scilit:
- On the determinants of director additions and removalsApplied Economics, 2012
- Shareholders’ agreements and voting power: evidence from Italian listed firmsApplied Economics, 2011
- Ownership structure and diversification in a scenario of weak shareholder protectionApplied Economics, 2011
- MANAGERS’ COMPENSATION AND MISREPORTING: A COSTLY STATE VERIFICATION APPROACHEconomic Inquiry, 2009
- Boards: Does one size fit all?Journal of Financial Economics, 2008
- The determinants of corporate board size and composition: An empirical analysisJournal of Financial Economics, 2007
- A Theory of Friendly BoardsThe Journal of Finance, 2007
- A Theory of Board Control and SizeThe Review of Financial Studies, 2006
- Profits persistence and ownership: evidence from the Italian banking sectorApplied Economics, 2005
- Theory of the firm: Managerial behavior, agency costs and ownership structureJournal of Financial Economics, 1976