Working Paper Series, Department of Economics, Copenhagen Business School
Why do firms have boards?
Abstract: 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
Keywords: Boards; governance; distributive conflicts; ultimate ownership; (follow links to similar papers)
JEL-Codes: G30; L22; (follow links to similar papers)
42 pages, March 1, 2002
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