Morten Bennedsen: Department of Economics, Copenhagen Business School, Postal: Department of Economics, Copenhagen Business School, Solbjerg Plads 3 C, 5. sal, DK-2000 Frederiksberg, Denmark
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 implications.
42 pages, March 1, 2002
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